•  f^WSftm^, 

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Report 

of 


ension  Laws 
Commission 


of 


Milwaukee 


Nov.  15,   1020 


of 


Pension  Laws 
Commission 


of 


Milwaukee 


Nov.  15,  1920 


.109 


CONTENTS 

Page 
Act  Providing  for  Creation  of  Pension  Laws  Commission 3 

Members  and  Staff  of  Pension  Laws  Commission 4 

Letter  of  Transmittal  .  5 

Chapter  I.- — Basic  Principles  of  a  Sound  and  Equitably  Adjusted 

Annuity  and  Benefit  System 15 

JL  '•> ,. 

Chapter  II. — General  Outline  of  Proposed  Plan 23 

Chapter  III. — Cost  of  Maintaining  the  System  in  Accordance  with 

the  Proposed  Plan .     36 

Chapter  IV. — Main  Provisions  of  Proposed  Plan 42 

Chapter  V. — Explanation  and  Accompanying  Tables,  Illustrative 

of  the  Operation  of  the  Proposed  Plan .' .  .  .     63 

Chapter  VI. — Experience  of  the  United  States  and  of  Other 
Countries  with  the  Operation  and  Growth  of  Pension  Legis- 
lation for  Public  Employes  78 

Chapter  VII. — Investigation  of  the  Operation  of  Existing  Pension 

Systems  in  the  City 90 

Chapter  VIII. — Actuary's  Chapter 101 


INDEX 


Page 

Accumulation  tables — 

Explanation  of 63 

Firemen  and  policemen. 65,  69,  70,  72,  74 
Teachers  and  municipals 71,73,76 

Actuary — 

Appreciation  and  thanks 102 

Computations  of  costs 11,  38,  90 

Method 101 

Allocation  versus  "pot"  plan 16 

Annuity — 

Age  and  service 44,  57,  76,  77 

Classes 43 

Maximum 43, 45 

Method  of  determination 64 

Time  available 32 

Appreciation  and  acknowledg- 
ments   13, 102 

Attractions  of  plan 19 

Benefits — 

Accumulation  tables 69 

Certainty  of  25 

Classes  of  27 

Death  and  disability 33,  56 

Inconsistencies 81 

Service — 

First  4  years 67 

5th-10th  year  68 

10th  year— age  55 70 

Age  65— age  75  75 

Sickness 34 

Special,  fire  and  police v .  12 

To  employes 

To  public  service 19 

Children's  annuities  10,  33,  54, 61 

Contributions — 

By  city 41 

By  employes 36,  56 

By  employes  entering  late  in 

'life 44,48,52 

By  employes,  method  of 56 

Limitation  of  45 

Refunds 53 

Termination  of  payment  of 37, 45 

Cost  of  pension,  present  plans — 

Firemen 91, 93,  96 

In  European  countries 87 

Police 90, 91, 93, 95 

Teachers 92, 94, 97 


Page 

Cost  of  pension,  proposed  plan — 

Spread  over  period  of  years 39 

Summary 40 

To  city 11,38 

To  employes 36 

Death  benefits 33,  56 

Deficits  in  present  funds 38,  39 

Disability — 

Limitation  of  benefits 34 

Performance  of  duty,  incurred 

in 56.57 

Performance  of  duty,  not  in- 
curred in  55 

Employes,  future  entrance — 
Method  of  raising  funds 27 

Employes,  present — 
Back  costs  spread  over  period  of 

years 39 

Method  of  raising  funds 28 

Modification  of  proposed  system    57 

Service  credited / 28 

Transfer  of  funds  with  transfer 
of  employes 62 

Equivalent  for  city's  contribu- 
tions   8,19,21 

European  funds 86 

Firemen's  fund — 
Accumulation  tables.. .  .65, 69,  70,  72,  74 

Actuarial  report  38,91 

Criticism  of  5 

Future  cost  of  present  system 96 

Present  cost  99 

Special  recommendations 12 

Funds-j- 

Administration 23,  42 

Cost  of  present  system 90 

Criticism 5 

Interest  rate 31 

'Merger  of  old  with  new 24 

Method  of  raising 28 

Modification  to  insure  maximum 

annuity 77 

Operation  funds,  explanation 63 

Present  condition  of  90,  98 

Proposed,  number  of 27 

Solvency,  assured  25 

Time  effective  24 

Transfer  with  transfer  of  employes  62 


Page 

History  of  pensions 78 

Fraternal  societies 16,  17 

Funds  in  Europe 86 

Funds  in  Milwaukee  5 

Funds  in  U.  S 78 

Reports  of  other  pension  commis- 
sions    85 

Teachers' 83 

Investment,  safeguards  to 26 

Municipal  employes — 

(See  Employes,  Future  entrance; 
Employes,  Present;  Teachers) 

New  York  City  experience 82 

Pension — 

Amount   varying  with   period   of 

service 8 

Amounts  and  percentage  of  salary    76 

Classes 43 

Individual  accounts  18 

Modern    conception    as    deferred 

pay 15, 86 

Pension  Laws  Commission — 

Act  of  creating  body 3 

Duties  of 3,  5 

Members  and  staff 4 

Recommendations 8, 12 

Pensioners  in  existing  funds — 

Annual  cost 25 

Certainty  of  benefits 

Plan- 
Main  provisions   42 

Outline 23 

Time  effective  24 

Policemen's  fund — 
Accumulation  tables  . .  .65,  69,  70,  72,  74 

Actuarial  report   38,  90 

Criticism 5 

Future  cost  of  present  system. ...     98 

Present  cost  95 

Special  recommendations 12 


Page 

Recommendations- 
General  8 

Proposed  plan,  outline  of 23 

Special,  firemen  and  policemen...  12 

Refunds- 
City  33 

Widows'  contribution  . .  29 


Reserve  system — 
Arguments  for  , 
Costs 


18 
10 


Retirement,  age  for 45 

Revenues,  inconsistency  of 81 

Sickness  and  accident 34 


Superannuation,  cost  of. 


Teachers'  fund — 

Accumulation  tables 71,  73,  76 

Actuarial  report 38,  92 

Criticism 7 

Future  cost  of  present  system 97 

Present  cost 100 

Typical    example    of    operation    of 
existing  funds  82 

Widows'  annuities 47,  60 

Accumulation  table 69,  75 

Computation,  time  of 10 

Funds,  method  of  raising 29 

Refunds 47 

Remarriage 35,  53 

Withdrawals  from  service 45,  59 

Workmen's  compensation  act,  effect 
of.  57 


ACT  PROVIDING  FOR  CREATION  OF  THE  PEN- 
SION LAWS  COMMISSION  AND  DEFIN- 
ING ITS  POWERS  AND  DUTIES 
CHAPTER  514,  LAWS  OF  1919 

AN  ACT  to  provide  for  the  creation  of  a  commission  in  cities 
of  the  first  class,  to  be  known  as  the  "pension  laws  commission"  and 
defining  the  powers  and  duties  of  such  commission. 

The  people  of  the  state  of  Wisconsin,  represented  in  senate  and 
assembly,  do  enact  as  follows: 

Section  1.  There  shall  be  in  every  city  of  the  first  class  a  com-' 
mission  to  be  known  as  the  "pension  laws  commission,"  to  consist  of 
five  members.  No  salary  or  other  compensation  for  service  shall  be 
paid  to  any  member  of  such  Commission.  Three  members  of  the 
commission  shall  constitute  a  quorum  necessary  for  the  transaction  of 
business.  It  shall  be  the  duty  of  the  Mayor  of  such  city  on  or  before 
the  second  Monday  in  July  to  appoint  five  members  of  said  commis- 
sion, not  more  than  two  of  whom  shall  at  any  time  belong  to  the  same 
political  party,  which  appointment  shall  be  subject  to  the  approval 
of  the  common  council,  and  the  said  commissioners  shall  hold  office 
for  two  years. 

Section  2.  It  shall  be  the  duty  of  said  commission  to  investigate 
the  operation  of  all  pension  laws  heretofore  enacted  in  such  cities  of 
the  first  class ;  to  gather  together  all  available  information  as  to  the 
present  and  probable  future  cost  of  maintaining  the  funds  created  by 
said  laws  and  to  collect  all  available  information  in  regard  to 
the  operation  of  similar  laws  in  other  states  and  countries.  The  com- 
mission shall  report  the  results  of  its  investigations,  together  with  any 
recommendations  it  may  see  fit  to  make,  to  the  Mayor  and  the  common 
council  of  such  city  not  later  than  December  1,  1920. 

Section  3.  The  commission  shall  have  power  to  call  upon  the 
insurance  department  of  this  state  and  other  departments  of  this  state 
for  such  assistance  as  it  may  require,  and  to  employ  an  actuary  and 
other  necessary  employes,  whose  salary  shall  be  fixed  by  the  common 
council  as  other  salaries  are  fixed.  It  shall  also  have  the  power  to 
examine  the  books  of  all  present  public  pension  funds  now  existing 
by  law  in  such  city,  to  compel  the  production  of  all  books  and  papers 
belonging  to  any  of  said  funds,  to  administer  oaths  and  to  take  the 
testimony  of  all  witnesses  necessary  for  the  purpose  of  this  act. 

Section  4.  The  expense  of  said  commission  shall  be  paid  out  of 
the  funds,  in  such  amounts  as  the  common  council  shall  appropriate 
for  that  purpose,  out  of  the  contingent  fund  of  the  common  council. 

Section  5.     This  act  shall  take  effect  upon  passage  and  publication. 

Approved  July  8,  1919. 

3 


MEMBERS  AND  STAFF  OF  THE  PENSION  LAWS 

COMMISSION 
i 

His  Honor,  Mayor  DANIEL  W.  HOAN,  appointed  as  members 

of  the  Pension  Laws  Commission: 
THOMAS  M.  DUNCAN 
ERNEST  W.  HELLER 
HERMAN  O.  KENT 
JOHN  H.  MANSCHOT 
CARL  J.  ZAISER 

The  .officers  of  the  commission  are: 

JOHN  H.  MANSCHOT,  Chairman 
ERNEST  W.  HELLER,  Secretary 


The  staff  consists  of: 

Actuary— DONALD  F.  CAMPBELL,  Professor  of  Mathematics  at 
Armour  Institute  of  Technology,  Chicago,  who  was  actuary  of  the 
Illinois  Pension  Laws  Commission  in  1916,  and  of  the  Illinois 
Pension  Laws  Commission  of  1918. 

Technical  Adviser — JOHN  P.  DILLON,  a  member  of  the  Illinois  Bar, 
who  was  a  member  of  the  Illinois  Pension  Laws  Commission  of 
1916,  and  of  the  Illinois  Pension  Laws  Commission  of  1918. 

Executive  Secretary — A.  FRANTZ  HERWIG,  a  newspaperman  of 
Milwaukee. 

Counsel,  assigned  by  City  Attorney— WALTER  J.  MATTISON,  As- 
sistant City  Attorney  of  Milwaukee. 


LETTER   OF  TRANSMITTAL 

To  His  Honor,  DANIEL  W.  HOAN,  Mayor,  and  to  the  Honorable, 
the  COMMON  COUNCIL  of  the  City  of  Milwaukee: 

The  Pension  Laws  Commission,  appointed  by  His  Honor,  the 
Mayor,  under  authority  of  an  Act  of  the  Legislature,  approved  July  8, 
1919,  submits  herewith  its  report  on  the  results  of  its  work. 
DUTIES 

The  duties  imposed  on  the  Commission  may  be  classified  under 
distinct  heads  as  follows: 

Recommendations  regarding  provisions  which  a  pension  plan  for 
public  employes  should  contain. 

A  collection  of  available  information  regarding  the  operation  of 
pension  systems  in  other  states  and  countries. 

An  investigation  of  the  operation  of  all  pension  systems  now 
existing  in  the  city. 

In  pursuance  of  these  duties,  the  Committee  issues  this  Report, 
containing  a  detailed  account  of  its  findings  and  recommendations. 

Findings  Regarding  Policemen's  and  Firemen's  Pension  Systems 

We  find  that  these  systems  are  a  means  of  attracting  young  men 
to  these  services  and  of  holding  them  there,  and  that  because  of  this, 
the  city  is  justified  in  making  fair  expenditures  for  their  support. 

At  the  same  time,  the  systems  are  fundamentally  unsound  in 
at  least  five  particulars : 

First.  An  employe  has  no  rights  to  pension  until  he  has  served 
for  22  years,  and  no  rights  to  refund  of  his  own  contributions  to 
the  fund,  at  any  time. 

The  tendency  of  such  a  provision  is  to  lessen  the  enthusiasm  of 
young  employes  for  the  pension  system. 

Second.  An  employe  attains  to  his  maximum  pension  after  22 
years  of  service,  and  except  in  the  cases  of  firemen  who  entered  or 
will  enter  the  service  on  or  after  July  1,  1913,  payment  is  conditional 
only  upon  withdrawal  of  the  employe  from  the  service. 

The  effect  of  this  is  that  men  may  leave  the  service  at  as  early 
an  age  as  45,  in  some  instances,  and  receive  each  as  large  a  pension 
as  he  would  receive  if  he  remained  in  service  until  his  efficiency 
began  to  decline.  Thus  the  system  actually  encourages  men  to  leave 
the  service  while  they  are  still  in  full  physical  and  mental  vigor. 

Firemen  who  entered  or  will  enter  the  service  on  or  after  July  1, 
1913,  have  no  right  to  pension  unless  disabled,  superannuated  or  dis- 
charged. The  tendency  of  such  a  provision  is  to  encourage  an  employe, 
who  is  not  disabled  or  superannuated,  to  commit  some  act  which  will 
bring  about  his  discharge,  when  he  has  served  the  required  length  of 
time,  if  he  desires  to  quit  the  service. 

5 


The  cost  of  any  such  early  withdrawals  from  the  service  is  very 
great.  There  are  to  be  reckoned:  (a),  The  cost  of  Pension  while  the 
former  employe  is  still  able  to  perform  his  duties;  (b),  The  cost  of 
the  pension  rights  which  his  successor  has  been  acquiring  during  such 
time;  and,  (c),  There  is  the  not  inconsiderable  cost  of  "labor  turn- 
over," that  is,  the  cost  of  breaking  in  the  man  who  took  his  place. 

The  cost  of  early  withdrawals  from  service  inures  to  the  hardship 
of  those  who  make  the  service  their  life  work,  because  such  men  must 
retire  on  an  amount  of  pension  insufficient  to  support  them  during 
their  declining  years,  or  else  the  cost  of  the  system  would  mount  to 
impossible  heights.  Also,  because  of  this  provision,  the  city  loses  an 
equivalent  which  should  be  its  in  that  a  pension  should  be  of  sufficient 
amount  to  encourage  employes  to  retire  on  pension  when  their  effi- 
ciency is  beginning  to  decline  because  of  advancing  age. 

Third.  The  systems  are  fundamentally  unsound  in  that  they 
afford  pensions  to  widows  without  regard  to  the  relative  ages  of  men 
and  their  wives. 

The  statistics  of  the  services  show  that  about  12  per  cent  of 
the  employes  who  are  age  fifty  or  older  are  unmarried.  The  oppor- 
tunity is  thus  afforded  to  many  men  to  marry  women  of  a  later 
generation  than  that  to  which  they  themselves  belong.  The  effect' 
on  the  fund  of  the  marriage  of  one  man  to  a  woman  much  younger 
than  himself  may  be  equally  as  disastrous  as  that  of  an  employe  retiring 
from  service  15  years  before  his  efficiency  has  begun  to  decline. 

Fourth.  The  systems  are  fundamentally  unsound,  in  that  the 
pensions  being  offered  to  aged  widows  who  were  wives  of  employes 
throughout  the  greater  part  of,  if  not  the  entire  period  of  such 
employe's  services,  are  entirely  inadequate  to  enable  any  such  widow 
to  afford  the  comforts  of  life  to  which  she  was  accustomed. 

No  one  will  deny  that  the  wife,  who  was  married  to  the  employe 
throughout  his  period  of  service,  is  as  worthy  of  receiving  from  the 
fund  an  amount  sufficient  to  provide  her  with  the  comforts  of  life 
during  her  few  years  of  ,old  age  as  is  the  employe  himself,  yet  such 
cannot  be  afforded  her  under  the  present  plans,  without  increasing 
the  cost  beyond  reason,  because  of  the  provision  that  young  widows 
will  draw  as  much  in  pension  per  year  as  will  old  widows. 

Also,  the  tendency  of  a  provision  affording  inadequate  benefits  to 
worthy  widows  is  to  rob  the  city  of  its  equivalent  for  the  moneys 
contributed  to  a  pension  system,  in  that  such  a  provision  tends  toward 
holding  men  in  service  after  they  become  inefficient  through  age. 

Fifth.     Another  particular  in  which  these  systems  are  unsound 

,   is  that  there  is  little  if  any  provision  made  for  accumulating  funds 

during  an  employe's  period  of  service  to  provide  the  pensions  promised 

6 


LETTER   OF   TRANSMITTAL 

after  the  employe  retires  from  service.  Thus  the  burden  of  paying 
the  pensions  is  not  being  carried  by  the  generation  that  receives  the 
service  but  is  thrown  on  to  the  succeeding  generations. 

Findings  Regarding  Public  School  Teachers'  Annuity  and  Retire- 
ment System 

We  find  that  in  this  system,  no  benefits  are  afforded  an  employe 
prior  to  the  end  of  15  years  of  service,  and  that  the  right  of  the 
employes  to  refunds,  upon  resignation  or  dismissal  from  service,  is 
limited  to  one-half  the  total  amount  of  the  contributions  made  by 
the  employe,  without  interest.  After  15  years  of  service,  the  employe 
is  entitled  to  a  totally  inadequate  disability  pension,  during  disability. 

To  become  entitled  to  an  old  age  pension,  the  employe  must  have 
been  in  service  for  at  feast  35  years,  if  still  under  the  age  of  65,  or 
for  at  least  25  years,  if  65  or  more  years  of  age.  The  usual  amount 
of  old  age  pension  is  $400  per  year,  although  an  employe,  by  reason 
of  long  service  and  advanced  age,  may  attain  to  a  pension  of  $500 
a  year. 

This  system  does  not  tend  to  attract  young  men  and  women  to 
the  service,  nor  does  it  tend  to  hold  them  there,  but  rather  the  reverse. 
Nor  does  it  afford  to  the  man  or  woman  whose  efficiency  is  declining 
because  of  advancing  age  a  pension  of  sufficient  amount  to  induce 
him  or  her  to  retire  from  service. 

Thus  the  city  is  not  reaping  the  full  benefit  of  the  expenditures 
it  is  making  on  behalf  of  this  fund.  Viewed  solely  as  a  business  prop- 
osition, it  should  make  more  ample  provisions  for  this  group  of 
employes,  especially  for  those  who  have  grown  old  in  the  service. 

Over  One-Half  of  the  Employes  of  the  City  do  not  Come  under 
any  Pension  System 

Employes  of  the  city  other  than  city  policemen,  firemen  and  public 
school  teachers,  comprising  over  one-half  of  the  whole  body  of  em- 
ployes, do  not  come  under  any  pension  system  at  the  present  time. 

Those  employes,  mostly  men  with  families  in  a  greater  or  less 
degree  of  dependence  upon  them,  receive  no  larger  a  remuneration 
for  their  services  than  do  employes  in  any  other  branch  of  the  city's 
service.  It  cannot,  therefore,  be  expected  that  they  can  save  enough 
from  their  wages  during  their  active  years  to  provide  them  with  the 
comforts  of  life  when  they  become  old.  If  an  adequate  pension  system 
is  not  put  into  effect  for  them,  the  result  will  be  that,  as  time  goes 
on,  the  city  will  suffer  through  the  presence  in  its  service  of  men 
whose  efficiency  will  have  become  impaired  through  age. 

The  extent  to  which  the  city  will  thus  suffer  cannot  be  determined 

7 


LETTER   OF   TRANSMITTAL 

in  terms  of  dollars  and  cents,  yet  some  idea  of  it  can  be  gained  perhaps 
by  reference  to  a  report  submitted  to  President  Taft  in  1912,  by  a 
federal  Commission.  •  The  data,  which  President  Taft  termed  con- 
servative, submitted  in  said  report,  show  that  the  federal  government 
could  retire  all  employes  whose  efficiency  had  declined  upon  pensions 
of  50  per  cent  of  salary  and  still  save  money  in  doing  so.  Statistics 
submitted  in  said  report  prove  that  employes  over  70  years  of  age 
earn  only  46  per  cent  of  their  salaries ;  that  they  are  not  only  costly, 
but  that  they  also  retard  the  process  of  promotion  and  thereby  dis- 
co'urage  the  younger  employes,  and  as  a  consequence  also  make  them 
less  efficient  by  destroying  their  initiative  and  abating  their  spirit  of 
industry. 

In  view  of  these  facts,  the  Commission  recommends  that  an  ade- 
quate pension  system  be  put  into  effect  for  these  employes. 

Provisions  which  a  Pension  System  for  Public  Employes  should 
contain  . 

The  Commission  believes  that  the  city  can  get  its  equivalent  for 
the  moneys  paid  into  a  pension  fund  for  its  employes  as  fully  as  it 
gets  the  equivalent  for  salaries  paid.  But  to  obtain  this  equivalent, 
the  pension  system  must  be  so  designed  that  young  men  and  women 
will  be  attracted  to.  the  service,  or  at  least  not  repelled  from  the 
service  because  of  it;  that  the  tendency  of  employes  in  service  to  seek 
service  elsewhere  will  be  reduced  to  a  minimum;  and  that  the  pension 
paid  will  be  so  graded  as  to  years  of  service  and  salaries  that  the 
head  of  a  department  will  not  be  deterred,  by  humanitarian  motives, 
from  bringing  pressure  to  bear  on  an  employe  whose  usefulness  is 
becoming  impaired  through  age,  to  induce  him  or  her  J:o  make  way 
for  a  younger  man  or  woman. 

It  believes,  further,  that  any  such  system  should  be  so  designed 
that  employes  cannot  order  their  affairs  in  such  a  manner  as  to  take 
advantage  of  their  fellow  employes  and  the  city,  by  drawing  benefits 
for  themselves  or  those  closely  related  to  them  by  marriage,  blood 
or  adoption,  out  of  proportion  to  those  drawn  by  other  employes  and 
their  relatives,  where  the  services  performed  are  similar.  In  other 
words,  no  employe  should  have  the  opportunity  to  "select  against  the 
fund"  to  his  own  advantage.  „ 

Commission  Recommends  an  entirely  new  Plan  for  City 

For  the  reasons  stated  in  the  two  preceding  paragraphs,  the 
Commission  recommends  that  all  present  systems  be  discontinued,  and 
that  in  place  of  them,  and  for  all  employes  of  the  city  who  do  not  now 
come  under  any  system,  there  be  instituted  four  systems,  as  stated 

8 


LETTER    OF   TRANSMITTAL 

in  Chapters  II  and  IV,  in  which  the  benefits  provided  will  he  uniform 
for  all  employes  of  the  city,  on  the  bases  of  salary  and  length  of  service, 
except  that  the  age  for  retirement  on  maximum  annuity  in  the  cases 
of  policemen  and  firemen  will  be  lower  than  in  the  other  services 
because  of  the  greater  need  for  physical  vigor  in  such  services. 

A  general  outline  of  the  provisions  which  the  Commission  rec- 
ommends is  given  in  Chapter  II,  a  more  detailed  outline  in  Chapter 
IV,  while  tables  illustrative  of  the  amounts  of  benefits  to  be  obtained 
are  given  in  Chapter  V.  A  statement  of  the  cost  of  a  system  operated 
on  the  proposed  plan  is  given  in  Chapter  III. 

Provisions  designed  to  give  the  City  its  Equivalent 

The  provisions  designed  to  attract  young  men  and  women  to  the 
service  and  to  hold  them  there  during  their  younger  years  are: 

(a).  Generous  benefits  in  cases  of  injury  or  death  incurred  in 
or  as  a  consequence  of  the  performance  of  dutjr. 

(b),  Benefits  in  cases  of  sickness  or  accident  not  incurred  in  the 
performance  of  duty.  * 

(c),  Children's  annuities,  as  an  attraction  to  young  men,  and  for 
that  matter  to  many  young  women  who  enter  the  city's  service  after 
becoming  widowred. 

(d),  Refunds  of  deductions  from  salary  for  Age  and  Service  An- 
nuity and  Widow's  Annuity  with  interest  at  the  rate  of  4  per  cent  per 
annum,  if  the  employe  resigns  or  is  dismissed  from  service  before  be- 
coming eligible  for  annuity. 

The  provisions  designed  to  rid  the  service  of  men  and  women 
whose  efficiency  is  becoming  impaired  through  age  are  pensions  to 
those  who  have  given  their  lives  to  the  service  of  amounts  sufficient 
to  provide  them  with  those  comforts  of  life  to  -which  they  have 
become  accustomed;  and  pensions  less  generous  but  6"f  equitable 
amounts,  to  those  who  entered  the  service  later  in  life. 

Provisions  designed  to  prevent  selection  against  the  fund 

The  Commission  believes  that  a  pension  system  should  not  be 
designed  to  bind  an  employe  to  a  service  under  penalty  of  a  great 
loss,  when  the  service  has  ceased  to  offer  him  anything  but  the 
salary  of  Ms  position  and  a  pension.  But  it  also  recognizes  the  neces- 
sity of  preventing  the  possibility  of  selection  against  the  fund  on  the 
part  of  any  employe,  and  to  that  end  has  taken  every  precaution: 

Under  the  plan  proposed,  according  to  which  Age  and  Service 
Annuity  is  payable,  the  amount  to  the  credit  of  the  employe  as  well 
as  his  attained  age  on  the  date  of  resignation  from  service  are  the 
elements  that  fix  the  amount  of  annuity  which  he  will  receive.  The 

9 


LETTER    OF   TRANSMITTAL 

amount  to  his  credit  increases  as  his  length  of  service  increases,  and 
of  course  his  age  increases  as  well.  The  employe  who  retires  at 
an  unusually  low  age  will  receive  therefore  very  much  less  in  annuity 
than  he  would  receive  if  he  had  remained  in  service  to  the  end  of 
his  active  life. 

The  amount  of  a  Widow's  Annuity  is  computed,  if  her  husband 
is  alive  at  the  time  the  annuity  is  fixed,  by  taking  into  account  the 
relative  differences  in  age  as  between  husband  and  wife.  If  the 
husband  is  not  alive  when  the  amount  of  the  Widow's  Annuity  is 
fixed,  her  annuity  is  determined  according  to  her  attained  age  at  the 
time  of  death  of  her  husband.  In  either  case  the  young  widow  will 
receive  less  than  the  older  one  because  of  the  expectation  that  she 
will  live  longer  to  enjoy  it. 

Children's  annuities  are  limited  to  children  of  the  blood,  and 
among  the  requirements  for  eligibility  for  such  annuity,  the  employe 
must  have  been  in  service  for  at  least  four  years.  The  reason  for 
this  latter  provision  is  to  prevent  persons,  who  feel  that  they  have 
nof  much  longer  to  live,  from  seeking  service  with  the  city  for  the 
sake  of  the  benefits  that  would  accrue  to  their  children  upon  their 
death. 

Benefits  in  cases  of  injury  or  death  incurred  in  or  as  a  conse- 
quence of  the  performance  of  duty  are  payable  only  upon  order  of 
the  Commission,  which  will  be  composed  entirely  of  representatives 
of  the  city. 

Toward  payment  of  benefits  in  ordinary  cases  of  sickness  or 
injury,  the  employes  contribute  with  the  city  in  the  ratio  of  1  to  1. 
The  reason  for  this  ratio  is  that,  because  of  it,  employes  will  be 
zealous  in  guarding  their  own  interests,  and  while  doing  so,  will 
guard  those  of  the  city  as  well. 

Commission  recommends  Reserve  and  Allocation  Plan  of  Accumu- 
lation 

The  Commission  recommends  that  to  provide  funds  necessary  to 
meet  payments  of  annuities  to  employes  and  their  widows,  the  reserve 
"plan  of  accumulation  be  adopted.  For  a  further  discussion  of  this 
plan,  see  page  25. 

The  advantages  of  such  a  plan  are  two  in  number; 

First.  .The  pension  burden  is  carried  by  the  generation  that 
receives  the  service,  and  the  employe  is  thus  assured  that  the  annuities 
promised  will  be  paid  because  he  sees  that  the  actual  funds  are  being 
accumulated  for  such  purpose. 

Second.  The  yearly  cost  to  the  city  becomes  vastly  less  burden- 
some, because  of  interest  accretions  on  funds  already  accumulated, 

10 


LETTER   OF   TRANSMITTAL 

under  such  a  plan,  than  under  one  where  funds  are  being  raised  yearly 
in  amounts  only  sufficient  to  meet  pension  payments  as  the  need  arises. 

To  provide  the  sums  necessary  to  place  the  funds  on  a  reserve 
basis,  the  Commission  recommends  that,  until  the  funds  are  placed 
on  a  reserve  basis  the  city  pay  certain  specified  amounts  into  the  funds 
each  year  and  also  allow  sums,  which  would  otherwise  revert  to  it 
as  refunds,  to  remain  in  the  funds.  In  addition,  it  would  maintain 
its  share  of  the  contributions  required  because  of  current  service. 

After  any  fund  is  placed  on  a  full  reserve  basis,  the  city  would 
contribute  for  such  group  only  to  keep  up  its  share  of  the  contribu- 
tions required  because  of  current  service,  and  it  would  receive  refund 
of  its  own  contributions,  with  interest,  according  to  the  provisions  of 
the  proposed  plan. 

Cost  to  City  under  Proposed  Plan 

The  Commission  recommends  that  the  extra  amounts  required, 
as  stated  in  the  second  paragraph  preceding,  be  such  that  each  fund 
will  come  to  a  full  reserve  basis  at  or  near  the  end  of  40  years  from 
January  1,  1922. 

The  yearly  amounts  required  from  the  city  for  all  pension  pur- 
poses during  such  accumulation  period,  until  the  funds  are  placed  on 
a  full  reserve  basis,  as  computed  by  the  actuary  (see  page  40),  will  be: 

For  Policemen's  Fund  $  246,225 

For  Firemen's  Fund  270,054 

For  Public  School  Teachers'  Fund 279,023 

For  Municipal  Employes'  Fund 400,282 


^  Total $1,195,584 

The  yearly  amounts  required  from  the  city  after  the  funds  are 

placed  on  a  full  reserve  basis,  also  computed  by  the  actuary   (see 
page  40) ,  will  be : 

For  Policemen's  Fund $1 12,818 

For  Firemen's  Fund 115,112 

For  Public  School  Teachers'  Fund 155,798 

For  Municipal  Employes'  Fund 213,562 


Total $597,290 

Results  stated  as  Percentages  of  Payroll 

Because  these  results  are  based  on  the  payroll  of  January  1,  1920, 
they  do  not  give  an  adequate  measure  of  the  cost  of  pensions  each 
year  under  a  payroll  that  is  increasing  from  year  to  year. 

A  much  more  accurate  measure  can  be  had  by  expressing  these 
figures  in  terms  of  percentages  of  the  payroll: 

In  terms  of  such  percentages,  the  city  would  pay: 

During  the  accumulation  period,  13.9  per  cent  of  the  payroll. 

After  the  accumulation  period,  6.8  per  cent  of  the  payroll. 

11 


LETTER    OF   TRANSMITTAL 

During  the  accumulation  period,  under  an  increasing  payroll,  the 
amount  paid  into  the  funds,  above  that  required  for  current  service, 
would  decrease  as  a  percentage  of  the  payroll  while  that  required  for 
current  service  wouid  increase  slightly.  The  net  result  would  be  that 
the  percentage  of  the  current  payroll  required  would  differ  only 
slightly  from  that  stated,  namely  13.9  per  cent. 

After  the  accumulation  period  under  an  increasing  payroll,  the 
amount  required  each  year,  stated  as  a  percentage  of  the  current 
payroll,  should  not  exceed  that  stated,  namely  6.8  per  cent. 

Cost  to  city  under  present  laws  as  compared  with  that  under  pro- 
posed plan 

A  comparison  of  total  costs  to  the  city  as  between  a  continued 
operation  of  the  present  laws  and  an  operation  of  a  system  according 
to  the  proposed  plan  would  be  of  little  value  because  of  the  inclusion 
in  the  proposed  plan  of  the  whole  body  of  municipal  employes,  com- 
prising approximately  one-half  of  the  entire  service. 

The  Commission  presents  its  recommendations  with  the  argument 
that  a  cost  to  the  city,  for  a  period  estimated  as  40  years  of  an  amount 
equal  to  13.9  per  cent  of  the  current  payroll  and  afterwards  of  an 
amount  equal  to  6.8  per  cent  of  the  current  payroll,  is  not  excessive 
in  view  of  the  fact  that  all  the  employes  of  the  city  would  come  under 
an  equitably  arranged  pension  plan. 

At  the  same  time,  the  results  of  Chapter  VII  disclose  that  forty 
years  from  January  1,  1922,  the  city  will  be  paying  approximately 
$600,000  each  year  for  policemen's  and  firemen's  pensions  alone,  on 
the  basis  of  the  payroll  of  January  1,  1920,  if  the  present  laws  remain 
in  effect.  On  the  basis  of  such  payroll,  it  would  be  paying  at  that 
time  under  the  proposed  plan  approximately  $600,000  each  year  for 
all  employes  of  the  city.  The  problem  then  can  be  stated  thus : 

By  payment  of  $1,200,000  each  year  for  a  period  estimated  as 
40  years,  instead  of  the  ever  increasing  amounts  which  it  will  be 
called  upon  to  pay  under  present  laws,  the  city  would  be  paying  after 
40  years,  under  the  proposed  plan,  for  all  'employes  of  the  city  an 
amount  equal  to  that  which  it  will  be  paying  into  the  policemen's  and 
firemen's  funds  alone  under  a  continued  operation  of  their  present  laws. 

Special  Recommendations  relating  to  Policemen  and  Firemen 

In  our  consultations  with  employes,  the  policemen  and  firemen 
presented  the  argument  that  inasmuch  as  the  greater  part,  if  not  all, 
of  their  service  for  the  city  was  given  while  they  were  under  their 
present  laws,  and  many  of  them  have  been  making  their  plans  for  the 
future  in  accordance  with  these  laws,  it  would  result  in  more  satisfied 
services  if  they  were  allowed  to  receive  the  benefits  for  themselves 

12 


LETTER   OF   TRANSMITTAL 

and  their  dependents  which  are  provided  in  their  present  acts,  upon 
fulfilment  of  the  requirements  prescribed  therein. 

The  Commission  believes  that  their  point  is  well  taken.  It  fur- 
thermore believes  that  in  passing  from  plans  which  are  easily  under- 
stood to  one  more  or  less  intricate,  the  change  in  these  services  should 
be  brought  about  gradually. 

It  therefore  recommends  that  policemen  and  firemen  who  will  be 
in  service  on  December  31,  1920,  and  their  dependents,  will  receive 
all  the  benefits  provided  in  their  present  acts  when  such  are  in  excess 
of  those  which  they  would  receive  under  the  provisions  of  the  proposed 
plan,  and  will  receive  the  benefits  provided  in  the  proposed  plan  when 
such  are  in  excess  of  those  afforded  under  their  present  acts. 

It  may  appear  on  first  thought  that  those,  provisions  will  involve 
an  extra  cost  to  the  city,  and  indeed,  if  resignations  and  dismissals 
from  service,  w;hile  employes  are  still  able  to  perform  their  duties 
properly,  will  continue  at  the  same  .rates  as  in  the  past  ten  years,  an 
extra  cost  will  be  involved.  On  the  other  hand,  however,  it  may  be 
expected  that  the  rates  of  resignation  of  the  past  ten  years  will  not 
continue  under  an  operation  of  the  proposed  system,  and  for  the 
following  reasons: 

An  employe  will  hesitate  to  quit  the  service  on  a.  pension  of  50 
per  cent  of  salary  when  he  sees  before  him,  if  he  remains  in  service 
a  few  years  longer,  a  prospect  of  a  pension  for  himself  of  possibly 
as  large  an  amount  as  75  per  cent  of  his  salary  and  a  pension  for 
his  wife  sufficient  to  maintain  her  in  comfort  if  she  should  survive  him. 

It  is  reasonable  to  assume  that  the  cost  to  the  city  because  of 
these  provisions  will  not  be  increased  excessively. 

Commission  is  presenting  Recommendations  in  Form  suitable  for 
Legislation 

In  order  that  our  recommendations  may  be  enacted  into  law,  if 
such  is  deemed. advisable,  we  are  preparing  them  in  forms  suitable  for 
legislation.  These  will  be  presented  to  you  along  with  this  report  or 
very  shortly  afterwards. 

Appreciation 

In  closing  this  letter,  the  Commission  wishes  to  acknowledge  its 
obligations  for  courtesies  received  from  all  with  whom  it  has  come 
in  contact,  but  especially  it  wishes  to  embody  herein  an  acknowledg- 
ment of  the  many  acts  of  kindness  and  courtesy  and  the  very  valuable 
assistance  given  to  it,  and  more  especially  to  its  Chairman,  at  the 

13 


beginning  of  its  labors  and  duties  and  continuously  thereafter  up  to 
the  day  of  his  death,  by  the  late  Charles  E.  McLenegan,  Librarian 
of  the  Milwaukee  Public  Library.  His  words  of  advice  and  encour- 
agement will  ever  be  gratefully  remembered. 

It  also  wishes  to  state  that  this  letter  would  be  incomplete  if  we 
failed  publicly  to  acknowledge  the  very  valuable  services  rendered  by 
'Dr.  Donald  F.  Campbell,  actuary  of  the  commission,  of  whom  it  may 
truthfully  be  said  that  his  word  is  as  good  as  his  bond;  for  while  we 
had  no  written  contract  with  him  he  carried  out  his  part  of  the  verbal 
agreement  honestly  and  faithfully.  He  rendered  services  of  inestimable 
value  and  his  judgment  was  at  all  times  sound  and  his  advice  came 
from  a  clear  brain  and  an  honest  heart. 

9 

Respectfully  submitted, 

THOMAS  M.  DUNCAN, 

HERMAN  O.  KENT, 

CARL  J.  ZAISER, 

JOHN  H.  MANSCHOT,  Chairman. 

ERNEST  W.  HELLER,  Secretary. 

Milwaukee,  Wis.,  November  15,  1920. 


14 


CHAPTER  I 


BASIC   PRINCIPLES   OF  A   SOUND  AND   EQUITABLY 
ADJUSTED  ANNUITY  AND  BENEFIT  SYSTEM 


AN  ANNUITY  IS  ESSENTIALLY  DEFERRED  PAY 

Pensions  systems  for  public  employes  in  this  country  originated 
in  the  police  and  fire  services  and  were  at  the  outset  designed  solely  for 
the  purpose  of  offering  relief  in  cases  of  injury  or  death  resulting  from 
the  performance  of  duty. 

At  the  outset,  the  public  was  the  sole  contributor  to  the  fund,  and 
the  amount  of  pension  paid  was  such  as  the  corporate  authorities 
deemed  just. 

Soon  thereafter,  the  provisions  were  changed  to  the  extent  that 
a  small 'assessment  was  levied  on  the  employes,  and  certain  benefits  be- 
came payable  to  an  employe  or  his  dependents  if  he  remained  in  service 
for  a  specified  number  of  years,  or  died  while  in  service  after  a  speci- 
fied number  of  years,  or  died  while  on  pension.  Also,  pension  systems 
began  to  extend  to  other  services  than  the  police  and  fire  services. 

When  employes  who  had  paid  their  assessments  for  quite  a  num- 
ber of  years  fulfilled  the  conditions  required  for  the  benefits  provided, 
they  came  to  look  upon  their  pensions  as  something  "earned"  by  rea- 
son of  service  and  contributions  to  the  fund.  Thus  the  idea  that  a 
pension  is  deferred  pay  originated. 

The  employes  had  not  come,  however,  to  view  their  assessments 
in  any  other  light  than  as  contributions  made  for  the  good  of  the 
sendee  as  an  aid  to  their  less  fortunate  fellow-employes  and  families. 
While  their  assessments  were  small  this  matter  gave  them  no  concern, 
but  when  it  began  to  become  apparent  that  the  resources  of  the  funds 
were  entirely  inadequate  to  provide  the  benefits  promised,  and  assess- 
ments had  to  be  increased,  the  services  other  than  police  and  fire  usual- 
ly had  provisions  incorporated  in  their  plans  providing  for  partial  re- 
turn of  the  moneys  paid  in  if  an  employe  resigned  or  was  dismissed 
from  service  before  becoming  eligible  for  pension.  But  the  idea  still 
prevailed  that  it  was  just  and  proper  that  an  employe  should  contribute 
something  to  aid  his  less  fortunate  fellow-employes  and  their  families. 

The  modern  conception  of  a  pension,  among  students  of  the  sub- 
ject, is  that  a  pension  promise  is  a  contract  between  the  employe  and 
the  public  as  his  employer  whereby  the  public  provides  that  certain  pay- 
ments on  account  of  salary  be  deferred,  and  paid  if  the  employe  ful- 
fills certain  conditions,  and  only  if  he  fulfills  such  conditions. 

15 


BASIC  PRINCIPLES 

If  the  principle  is  accepted  that  a  pension  promise  is  a  contract 
entered  into  between  the  employe  and  the  public  as  his  employer,  where- 
by certain  payments  to  the  employe  are  earned  if  he  fulfills  certain  re- 
quirements, then  it  follows  at  once  that  the  employer  in  simple  justice 
to  the  employe  should  lay  aside  each  year  while  service  is  being  ren- 
dered, and  allocate  to  the  employe,  the  amount  required  to  meet  these 
deferred  payments  because  of  service  given  during  the  year  in  question. 

Thus  arise  the  Reserve  and  Allocation  principles  as  applied  to 
pensions. 

If  the  principle  is  accepted  that  an  employe  who  has  fulfilled  all 
the  conditions  of  the  contract  entered  into  has  earned  his  pension,  then 
his  pension  becomes  an  annuity  in  the  sense  in  which  the  term  is  under- 
stood, namely,  future  payments  bought  by  the  employe  himself  from  his 
own  earnings.  This  removes  any  element  of  charity  from  the  trans- 
action. 

ALLOCATION  PLAN  AND  "POT"  PLAN 

In  the  foregoing  a  sufficient  reason  was  given  for  the  adoption  of 
a  Reserve  and  Allocation  plan  for  payment  of  annuities.  Another  rea- 
son may  also  be  given,  which  is  that  it  automatically  forces  a  proper 
system  of  cost  accounting. 

During  the  last  one  hundred  and  fifty  years  there  have  been 
started  in  this  country  probably  over  10,000  friendly  or  fraternal  socie- 
ties. These  were  started  with  the  extremely  laudable  purpose  of  ren- 
dering help  to  those  in  trouble  and  promoting  a  feeling  of  friendly  co- 
operation among  the  members.  They,  however,  carried  their  feeling 
of  friendly  co-operation  so  far  that  their  rules  prescribed  that  all 
should  pay  equally  into  the  fund  and  that  this  money  when  paid  should 
be  placed  as  it  were  in  a  "pot"  and  from  this  pot  all  benefits  would 
be  paid. 

There  was  no  attempt  made  to  determine  the  amounts  necessary 
to  maintain  the  solvency  of  the  institution,  and  usually  all  alike,  both 
young  and  old,  paid  the  same  amounts  toward  death  benefits. 

In  many  cases  the  amounts  paid  were  entirely  inadequate  to  pay, 
for  any  extended  period  of  years,  the  benefits  promised  even  if  all  who 
joined  were  young  men;  but  in  some  cases  the  amounts  contributed 
would  have  been  sufficient  to  maintain  the  solvency  of  the  society 
throughout  a  long  period,  provided  that  young  men  in  ever  increasing 
numbers  would  join  the  society. 

It  was  soon  found  out  that  young  men  would  not  join  the  society, 
and  thus  help  to  carry  the  older  men,  while  the  older  men  would  join 
because  the  rates  gave  evidence  that  they  might  get  something  for 
nothing  out  of  the  society.  This  selection  against  the  society  on  the 
part  of  the  public  soon  led  to  the  society's  undoing  except  in  a  few 

16 


BASIC  PRINCIPLES 

cases  where  the  leaders  foresaw  the  inevitable  result  and  made  pro- 
visions to  put  the  society  on  a  sound  basis  before  it  became  hope- 
lessly insolvent. 

The  methods  they  adopted  were  these: 

They  saw  that  no  business  could  be  conducted  properly  unless  it 
had  a  proper  system  of  cost  accounting.  They  saw  also  that  such  a 
system  involves  a  careful  study  of  the  cost  of  each  item  that  goes  to 
make  up  the  total  cost.  This  principle,  they  argued,  applies  as  well  to 
the  building  of  a  friendly  society  as  to  the  building  of  a  house. 

When  applied  to  a  friendly  society,  it  involved  the  determination, 
regarding  each  individual  separately,  of  the  actual  cost  of  providing 
the  benefit  promised  to  that  individual.  Thus  they  instituted  a  system 
of  charging  all  individuals  of  the  same  age  at  entrance,  the  same  rates, 
and  individuals  of  different  ages  at  entrance  different  rates,  making 
these  rates  so  high  at  the  outset  that  they  would  not  need  to  raise  them 
afterwards,  and  of  allocating  to  each  individual  the  difference  between 
what  he  paid  into  the  fund  and  his  fair  share  towards  the  benefits  paid 
from  the  fund,  and  holding  this  amount  to  the  credit  of  the  individual 
not  to  be  used  for  any  purpose  but  to  pay  the  benefits  provided  in  his 
individual  case. 

We  thus  came  to  have  the  Reserve  and  Allocation  plan,  a  plan 
which  proved  the  salvation  of  all  the  friendly  societies  that  survived, 
and  one  that  is  now  in  force  in  almost,  if  not  every,  friendly  or  fra- 
ternal society  in  existence,  although  the  members  themselves  may  not 
all  be  aware  of  it. 

Pension  systems  started  with  the  same  objects  in  view  as  did  the 
friendly  societies  and  along  the  same  lines.  They  first  had  the  "pot" 
plan  which  proved"  disastrous  to  so  many  friendly  societies.  This  plan 
proved  disastrous  to  some  of  the  pension  systems  and  would  have 
proved  disastrous  to  many  others  only  that  the  legislatures  came  to 
their  assistance. 

Furthermore,  the  disasters  occurred  for  the  very  same  reason  as 
in  the  case  of  friendly  societies,  namely,  by  those  interested  selecting 
against  the  fund.  Employes  would  retire  on  pension  while  still  able  to 
perform  their  duties,  and  seek  employment  elsewhere,  being  attracted 
by  the  fact  that  their  new  salaries  plus  their  pensions  would  amount  to 
more  than  their  old  salaries.  Young  girls  would  marry  old  men  for 
their  pension  prospects  and  thus  draw  from  the  fund  three  or  four 
times  as  much  as  the  widows  would  draw  who  married  men  of  their 
own  generation. 

This  selection  against  the  fund  became  so  common  that  legisla- 
tures began  to  demand  that  these  abuses  of  the  fund  would  have  to 
cease,  because  under  such  conditions  the  public  was  not  getting  its 

17 


BASIC  PRINCIPLES 

equivalent  for  the  money  it  paid  into  the  fund.  Then  those  interested 
in  pensions  began  to  devise  a  proper  systerrl  of  cost  accounting.  They 
naturally  adopted  the  Reserve  and  Allocation  plan  that  proved  so  sat- 
isfactory in  friendly  and  fraternal  societies. 

Under  this  plan  the  contributions  made  by  any  employe  and  by 
the  public  on  behalf  of  such  employe  would  be  credited  when  made 
to  the  employe  who  made  them  or  for  whom  they  were  made.  Against 
these  credits  would  be  charged  the  proper  share,  fairly  and  equitably 
determined,  of  the  cost  of  the  benefits  paid.  The  balance  would  be 
held  as  a  credit  to  the  employe  and  no  part  of  it  could  be  taken  away 
from  him  in  order  to  create  assets  to  pay  benefits  to  any  who  preceded 
him,  but  would  be  used  solely  to  provide  benefits  for  him  and  his  de- 
pendents. 

Under  such  a  plan,  an  employe  may  retire  from  service  while 
still  able  to  perform  valuable  service  elsewhere,  and  receive  his  just 
share  from  the  fund,  while  the  employe  who  elects  to  hold  his  present 
position  until  it  is  necessary  for  him  to  relinquish  it  because  of  ad- 
vanced age  will  also  receive  his  just  share  from  the  fund,  which  will 
be  very  much  more  than  the  other  received. 

Then,  too,  under  the  Reserve  and  Allocation  plan,  no  injury  can 
come  to  the  fund  if  a  man  marries  a  woman  of  a  younger  generation. 
The  allocation  plan  provides  the  same  aggregate  benefit  for  the  widow 
of  a  man  of  her  own  generation  as  it  does  for  the  younger  generation 
widow.  In  the  case  of  the  same  generation  widow,  the  benefit  would 
be  paid  in  larger  instalments  and  during  a  shorter  period  of  time  than 
to  the  younger  generation  widow.  In  other  words,  the  younger  gen- 
eration widow  would  be  drawing  a  benefit  for  a  longer  period  of  years, 
but  the  payments  would  be  that  much  smaller.  The  totals  for  each 
would  be  the  same. 

ARGUMENTS    AGAINST    A    RESERVE    SYSTEM— WITH 

REPLIES 

There  are  those  who  argue  against  a  Reserve  and  Allocation  sys- 
tem. They  state  that  it  is  now  a  common  custom  for  a  municipality 
to  issue  bonds  for  a  public  improvement  and  fix  the  dates  of  maturity 
so  that  the  burden  of  repaying  the  principal  will  fall  on  a  later  gen- 
eration. 

Without  entering  into  a  discussion  of  the  advisability  of  issuing 
long-time  bonds  for  public '  improvements,  it  may  be  said  here  that 
the  two  problems  are  entirely  unlike.  In  the  one  case,  the  generation 
that  pays  back  the  principal  has  the  use  of  the  public  improvement.  In 
the  other  case,  service  is  of  so  intangible  a  character  that  the  gen- 
eration that  would  provide  the  annuity,  if  disbursement  on  a  current 

18 


BASIC  PRINCIPLES 

liability  basis  were  adopted,  may  lose  sight  of  the  benefit  it  derived 
from  the  service. 

Another  argument  against  a  Reserve  System  is  that  it  requires 
the  accumulation  of  large  sums  which  may  be  used  for  purposes  other 
than  those  for  which  they  were  created. 

The  answer  to  this  argument  is  that  there  are  many  instances 
where  large  funds  have  been  accumulated,  and  are  being  disbursed 
only  in  accordance  with  the  purposes  for  which  they  were  accumu- 
lated. All  that  is  necessary  for  a  proper  disbursement  of  the  funds  is 
the  presence  in  the  plan  of  well-known  safeguards  against  improper 
distribution.  One  of  the  best  of  these  is  the  allocation  plan  whereby 
by  far  the  greater  part  of  the  assets  would  be  assets  accumulated  to 
meet  a  liability  which  is  definitely  determined,  and  only  an  extremely, 
small  part  of  the  assets  would  be  in  the  form  of  free  surplus. 

THE  PUBLIC'S  EQUIVALENT  FOR  THE  MONEYS  PAID 
TO  AN  ANNUITY  FUND  AND  PROVISIONS  DE- 
SIGNED FOR  OBTAINING  SAME 

It  will  probably  be  accepted  without  argument  that  if  the  public 
contributes  towards  an  annuity  fund  for  the  benefit  of  its  employes, 
then  it  should  receive  its  equivalent  for  the  contributions  made. 

This  equivalent  must  take  the  form  of  an  increase  in  loyalty  to- 
wards, and  enthusiasm  for,  the  service  on  the  part  of  all  employes, 
without  regard  to  ages  or  lengths  of  service. 

The  plan  according  to  which  annuities  are  to  be  paid  must 
therefore : 

1.  Be  attractive  to  men  and  women  during  their  earlier  years  of 
service.  . ' 

2.  Be  a  means  of  holding  employes  in  the  service  during  their 
active  years. 

3.  Offer  an  annuity  of  sufficient  amount  to  the  employe  who  has 
given  a  life-time  of  service  to  the  public  to  enable  him  to  spend 
his  declining  years  in  a  manner  somewhat  in  keeping  with  the 
standards  of  living  to  which  he  has  accustomed  himself. 

4.  Be  so  designed  that  those  having  in  charge  the  tenure  of  of- 
fice of  an  employe  may  know  that,  when  his  efficiency  is  be- 
coming impaired  through  age,  there  is  provided  for  him  an 
annuity   in   keeping   with   the   length   and   character   of   the 
service  rendered. 

19 


BASIC  PRINCIPLES 

PROVISIONS  DESIGNED  TO  MAKE  AN  ANNUITY  SYS- 
TEM ATTRACTIVE  TO  EMPLOYES  DURING  THEIR 
EARLIER  YEARS  OF  SERVICE 

No  service  can  retain  its  efficiency  for  any  length  of  time  unless 
men  and  women  enter  it  while  still  young  in  years.  An  annuity  system 
should  then  be  so  arranged  as  to  be  attractive  to  men  and  women  view- 
ing it  through  youthful  eyes. 

What  is  the  viewpoint  of  such  men  and  women?  When  they 
enter  the  service,  they  seldom,  if  ever,  intend  that  the  service  shall  be 
their  life  work.  They  look  upon  it  merely  as  a  stepping-stone  to  some 
4 other  line  of  endeavor.  The  prospect  to  such  people  of  an  annuity 
when  they  become  old  and  inefficient  stirs  not  the  slightest  enthusiasm 
in  them,,  for  their  present  thought  is  that  they  will  not  be  in  the  service 
when  they  are  old,  and  they  can  hardly  picture  a  possibility  of  their 
ever  becoming  inefficient. 

However,  the  years  go  by  and  many  of  them  are  still  in  the  service, 
and  the  young  men  that  remain  have,  in  nearly  every  instance,  mar- 
ried and  are  bringing  up  families.  During  these  years  their  principal 
care  is  for  the  immediate  present,  not  for  the  remote  future  when  they 
are  no  longer  able  to  work.  If  the  annuity  plan  offers  nothing  more  to 
any  such  employe  than  the  prospect  of  something  in  old  age,  it  still  does 
not  appeal  to  him.  It  is  only  when  he  is  getting  up  in  years  and  his 
family  has  become  comparatively  self-supporting  that  the  annuity 
prospect  begins  to  attract  him.  In  the  meantime,  the  .employer  has 
been  deprived  throughout  the  best  years  of  the  employe's  life  of  that 
equivalent  of  its  contributions  that  ought  to  be  its  through  an  increase 
in  loyalty  and  enthusiasm  on  the  part  of  the  employe  for  the  service. 

Although  a  service  cannot  maintain  its  efficiency  unless  young 

-  men  and  women  enter  it,  still,  men  and  women  of  more  mature  years 

should  not  be  discouraged  from  entering  it.    Indeed,  in  certain  lines  of 

work  the  elimination  of  such  people  would  be  a  positive  detriment  to 

the  public. 

These  people  usually  enter  the  service  near  the  top  of  the  salary 
list  of  that  class  of  service  into  which  they  enter.  In  the  great  ma- 
jority of  such  cases,  however,  such  service  is  the  lowest  paid  service 
in  the  city,  while  at  the  same  time  it  requires  a  grade  of  service  which 
cannot  be  given  when  the  employe  has  become  inefficient  through  age. 

To  impose  a  length  of  service  requirement  for  annuity  on  such  men 
and  women  that  would  carry  them  well  beyond  the  age  when  their  ef- 

20 


BASIC  PRINCIPLES 

ficiency  might  reasonably  be  expected  to  decline,  would  have  the  ef- 
fect of  lowering  their  salaries  by  the  amounts  deducted  from  salaries 
for  annuity  purposes,  without  offering  them  benefits  of  any  value. 
This  the  employes  would  very  quickly  recognize,  with  the  result  that 
the  public  would  fail  to  receive  an  equivalent  for  its  contributions  in 
the  way  of  any  increase  in  loyalty  on  the  part  of  such  employes,  while 
in  practice  the  effect  would  be  that  men  and  women  would  be  retained 
in  service  long  after  their  efficiency  becomes  impaired  through  age. 

An  annuity  system  would  offer  attractions  to  such  men  and  women 
if  it  contained  the  following  features: 

1.  Return  of  the  amounts  deducted  from  salary,  with  as  high  a 
rate  of  interest  as  can  be  realized  from  safe  investments,  in  the  event 
that  the  employe  withdraws  from  service  before  being  eligible  to  enter 
upon  annuity. 

2.  A  provision  for  disability  benefits  permitting  the  employe  to 
participate  in  such  benefits  from  the  beginning  of  his  service. 

3.  A  provision  for  a  Widow's  Annuity  and  for  annuities  to 
young  children  of  the  employe  in  the  event  of  his  death  while  in 
service. 

PROVISIONS  DESIGNED  TO  HOLD  EMPLOYES  IN  THE 
SERVICE  DURING  THEIR  ACTIVE  YEARS 

A  system  designed  to  hold  the  employes  in  service  until  it  may 
be  expected  that  their  usefulness  is  becoming  impaired  through  age, 
while  at  the  same  time  leaving  them  free  to  seek  employment  elsewhere 
if  they  choose  without  sacrifice  of  their  just  rights  in  the  fund,  must 
provide  annuities  graded  so  that  the  amount  of  an  annuity  in  any  given 
case  will  increase  as  the  years  of  service  of  the  employe  increase. 

If  an  employe  has  satisfied  all  requirements  for  a  maximum  an- 
nuity, while  yet  in  full  mental  and  physical  vigor,  it  is  but  natural  for 
him  to  accept  employment  elsewhere,  if  an  opportunity  presents  itself 
whereby  his  new  salary  plus  his  annuity  will  be  more  than  equal  to 
his  present  salary.  When  any  such  employe  withdraws  from  service, 
however,  the  public  loses  an  employe  especially  trained  for  the  work 
he  was  performing  and  is  thus  put  to  the  expense  of  training  an- 
other for  this  position.  It  furthermore  has  to  pay  the  cost  of  the  an- 
nuity to  the  one  who  has  withdrawn  from  service  while  at  the  same 
time  assuming  an  annuity  liability  on  the  one  who  took  his  place. 

This  three- fold  expense  will  be  almost  entirely  eliminated  with- 
out detriment  to  the  service  if  the  employe  can  look  forward  to  an  in- 
creasing annuity  as  his  years  of  service,  during  his  active  period  of 
life,  increase. 

21 


This  is  from  the  viewpoint  of  the  public  as  employer.  From  the 
viewpoint  of  the  employe  himself  an  equally  cogent  reason  for  graded 
annuities  may  be  advanced. 

If  an  annuity  system  is  so  arranged  that  an  employe  may  retire 
on  his  maximum  annuity  while  yet  having  in  prospect  a  number  of 
active  years,  the  annuity  must  be  so  low  that  the  one  who  remains 
faithful  to  the  service  to  the  end  of  his  active  period  cannot  retire  on 
an  annuity  that  will  provide  for  him  those  comforts  of  life  to  which 
he  has  become  accustomed. 

VIOLENT  CHANGES  IN  EQUITIES  ARE  AVOIDED  IN  A 
GRADED  ANNUITY  SYSTEM 

To  illustrate  what  is  meant  by  violent  changes  in  equities :  Sup- 
pose that  a  man  enters  the  police  or  fire  service  at  age  25  on  a  salary 
of  $1,764, per  year,  and  remains  at  that  salary  during  his  period  of 
service.  When  he  attains  an  age  just  short  of  47,  having  completed  a 
period  of  service  just  short  of  22  years,  he  has  paid  into  the  fund 
$1,540,  including  interest  at  4  per  cent.  At  this  time  his  equity  in 
the  fund,  if  he  should  resign  or  be  dismissed  from  service,  is  nothing. 
When  he  has  completed  his  22  years  of  service,  however,  his  equity 
upon  retirement  is  $882  per  year  for  life.  If  he  retires  immediately 
after  completion  of  22  years  of  service  and  lives  the  average  length  of 
life  of  a  man  of  his  age,  he  will  receive  these  payments  for  23  years, 
or  payments  in  the  aggregate  of  $20,286.  His  equity  has  thus  grown 
overnight  from  nothing  to  this  amount. 

By  means  of  a  graded  annuity  system,  violent  changes  in  equities 
may  be  avoided. 

The  principles  discussed  in  this  Chapter  have  all  been  taken  into 
consideration  in  devising  the  plan  outlined  in  Chapter  IV  and  illus- 
trated in  Chapter  V. 


22 


CHAPTER  II 


GENERAL   OUTLINE   OF   PROPOSED    PLAN 


A  general  outline  of  the  plan  proposed  by  the  Pension  Laws  Com- 
mission for  the  payment  of  annuities  and  other  benefits  to  public  em- 
ployes of  the  city  of  Milwaukee  is  given  in  this  chapter.  For  a  more 
detailed  outline,  the  reader  is  referred  to  Chapter  IV. 

System  to  be  Composed  of  Four  Funds 

The  proposed  system  involves  the  maintainance  of  four  funds,  each 
distinct  from  the  others,  constituted  as  follows : 

A  Policemen's  Annuity  and  Benefit  Fund,  for  all  policemen  of  the 
city,  including  the  policemen  in  the  public  parks. 

A  Firemen's  Annuity  and  Benefit  Fund,  for  all  firemen  of  the  city. 

A  Public  School  Teachers'  Annuity  and  Benefit  Fund  for  all  pub- 
lic school  teachers  of  the  city,  including  those  not  now  in  any  pension 
,system. 

A  Municipal  Employes'  Annuity  and  Benefit  Fund  for  all  em- 
ployes of  the  city  who  are  not  included  in  any  of  the  other  funds. 

Provisions  in  all  Four  Funds  Identical 

The  provisions  regulating  the  funds  are  identical  in  all  four  funds 
except  for  minor  differences  to  meet  peculiar  needs  in  the  different 
services,  and  except  that  a  policeman  or  a  fireman  who  will  be  in 
service  on  December  31,  1920,  and  his  dependents,  shall  be  granted  any 
privilege  contained  in  the  act  regulating  the  fund  to  which  he  is  then 
contributing  when  such  privilege  offers  a  greater  benefit  for  himself  or 
his  dependents  than  could  be  obtained  under  the  provisions  of  the  pro- 
posed plan. 

Management  of  Funds 

It  is  recommended  that  each  of  the  funds  be  under  the  control  of 
a  Board  of  Five  Trustees  constituted  as  follows : 

1.  Three   members,   elected  by  the  employes   concerned   from 
among  their  own  number,  one  to  be  elected  each  year  to  serve  for  a 
period  of  three  years. 

2.  One  person  to  be  appointed  annually  to  serve  for  a  period  of 
one  year,  the  appointment  to  be  made  by  the  Mayor  in  the  cases  of  the 
Policemen's,  Firemen's*,  and  Municipal  Employes'  Funds,  and  by  the 
Board  of  School  Directors  in  the  case  of  the  Public  School  Teachers' 
Fund. 

3.  The  Chairman  of  the  Commission,  in  the  event  that  a  Com- 
mission is  created,  as  stated  later,  or  if  no  such  Commission  is  created, 
the  Comptroller  of  the  City. 

23 


GENERAL   OUTLINE    OF    PLAN 

It  is  recommended  that,  for  economy  and  greater  efficiency  in  ad- 
ministration, a  commission  be  created  to  be  constituted  as  follows : 

Three  members  to  be  appointed  by  the  Mayor,  one  to  be  appointed 
each  year  to  serve  for  a  period  of  three  years. 

Duties  of  Boards  of  Trustees  and  Commission 

Each  Board  of  Trustees  will  pass  upon  all  applications  for  an- 
nuities or  .other  benefits  for  employes  coming  under  the  provisions  of 
the  act  regulating  the  fund  under  its  control,  except  for  benefits  for 
injury  or  death  incurred  in,  or  as  a  result  of,  the  performance  of  duty. 
It  will  authorize  all  transactions  regarding  the  purchase  or  sale  of  se- 
curities, except  that  investments  can  be  made  only  from  the  lists  of 
securities  approved  by  the  Commission  as  being  suitable  investments 
for  such  funds.  It  will  have  power  to  appoint  its  own  medical  exam- 
iners to  investigate  cases  of  disability  not  incurred  in  the  performance 
of  duty. 

The  Commission  will  have  charge  of  the  administration  of  all  four 
funds,  with  power  to  employ  all  assistance  necessary,  and  to  incur  all 
necessary  expense  for  a  proper  administration  of  such  funds.  It  will, 
from  time  to  time,  prepare  lists  of  securities  in  which  the  Boards  of 
Trustees  may  invest  funds,  which  lists  will  be  compiled  from  among 
the  classes  of  securities  stated  in  the  acts  as  being  classes  in  which  inr 
vestments  may  be  legally  made.  .  It  will  pass  upon  all  applications  for 
annuities  and  other  benefits  arising  from  injuries  received  in  the  per- 
formance of  duty. 

When  Proposed  System  Would  Take  Effect 

It  is  proposed  that,  as  soon  as  practicable  after  the  passage  of  the 
acts,  the  Boards  of  Trustees  and  the  Commission,  as  stated  hereinbefore 
under  "Management  of  Funds"  will  be  created.  From  the  dates  of 
their  creation  until  January  1,  1922,  their  duties  will  be  confined  to  a 
preparation  of  the  books  and  records,  and  a  compilation  of  the  neces- 
sary data,  for  a  proper  conduct  of  the  affairs  of  the  system.  On  Janu- 
ary 1,  1922,  deductions  from  salaries  and  contributions"  by  the  city  as 
required  under  the  proposed  plan  will  begin,  and  on  and  after  such  date, 
all  annuities  and  other  benefits  will  be  payable  under  the  provisions  of 
the  proposed  plan.  On  said  date  the  entire  management  will  pass  to 
the  Boards  and  Commission  created  as  hereinbefore  stated. 

Merging  of  Existing  Funds  with  Superseding  Funds 

It  is  proposed  that  all  Boards  of  Trustees  of  existing  pension  funds 
will  exercise  the  full  duties  of  their  offices  until  January  1,  1922,  and 
on  that  date,  each  Board  will  turn  over  to  the  custodian  of  the  funds 
of  the  Board  of  the  Fund  which  such  Fund  supersedes  all  the  assets 
in  its  possession,  and  will  thereupon  cease  to  exist. 

24 


GENERAL    OUTLINE    OF    PLAN 

Provisions  for  Pensioners  on  the  Rolls  on  January  1,  1922 

Pensioners  on  the  rolls  of  any  Fund  at  the  time  the  assets  of  the 
Fund  will  be  turned  over  to  the  new  Board  of  Trustees  will  henceforth 
receive  their  pensions  from  the  fund  to  which  the  assets  were  trans- 
ferred. 

The  amounts  of  pension  they  and  their  dependents  will  receive 
will  be  those  provided  under  the  act  according  to  which  they  received 
their  pensions. 

Reserve  and  Allocation  Plan  of  Accumulation  Recommended 

To  provide  funds  necessary  to  meet  payment  of  annuities  to 
employes  and  the  widows  of  employes  because  of  service  rendered  by 
the  employe  after  January  1,  1922,  what  may  be  called  the  Reserve 
and  Allocation  Plan  of  Accumulation  is  adopted.  This  consists  in 
setting  aside  each  year  on  behalf  of  each  employe,  while  he  is  in 
active  service,  certain  sums,  which  sums  will  be  allocated  to  the 
employe  when  set  aside,  and  with  interest  accretions  thereon  will  be 
used  to  provide  him,  or  his  widow,  or  both,  under  prescribed  condi- 
tions, with  an  annuity  or  annuities  of  such  amount  as  the  accumulated 
sum  to  his  credit  will  provide,  without  having  to  draw  from  sources 
outside  the  fund  for  payment  of  any  part  of  such  annuity  or  annuities 
after  the  service  of  the  employe  has  ceased.  The  amounts  of  such 
annuities  will  be  determined  by  means  of  a  specified  table  of  mortality 
and  a  specified  rate  of  interest. 

This  plan  applies  only  to  service  rendered  on  or  after  January  1, 
1922.  To  provide  annuities  or  parts  of  annuities  because  of  service 
rendered  before  such  date,  and  because  of  contributions  made  to  exist- 
ing funds,  and  also  to  guarantee  the  payment  of  pensions  to  those 
on  the  pension  rolls  on  January  1,  1922,  payment  by  the  city  of 
certain  stated  amounts  will  be  made  each  year  into  each  fund  until 
there  is  paid  into  the  fund  an  amount  sufficient  to  provide  the  annuities 
or  parts  of  annuities  granted  because  of  such  prior  service  and 
contributions. 

When  a  sufficient  amount  is  thus  paid  into  each  fund,  the  system 
will  be  entirely  on  a  reserve  basis. 

For  the  yearly  amounts  thus  to  be  paid  and  the  accumulation 
period  necessary  to  place  the  funds  on  a  reserve  basis,  see  Chapter  III. 

Reserve  and  Allocation  Plan  Assures  Permanent  Solvency 

Under  the  reserve  and  allocation  plan  recommended,  the  solvency 
of  the  funds  will  be  assured  for  all  time,  provided: 

1.  The  mortality  table  used  in  the  computations  will  be  found 
to  measure,  within  reasonable  limits,  the  actual  mortality  experienced 
among  the  groups  of  annuitants. 

25 


GENERAL    OUTLINE    OF    PLAN 

2.  The  rate  of  interest  adopted  can  be  realized  in  practice. 

3.  There  are  no  losses  from  investments. 

To  safeguard  the  funds  on  these  points,  the  Commission  has  taken 
every  precaution: 
One  Safeguard 

The  table  of  mortality  recommended  is  the  American  Experience 
Table  of  Mortality — a  table  used  by  practically  all  legal  reserve  life 
insurance  companies  in  the  United  States — and  the  rate  of  interest 
recommended  is  4  per  cent. 
A  Further  Safeguard 

If  this  table  should  show  a  higher  death  rate  at  the  older  ages 
than  will  actually  occur  in  an  operation  of  the  system,  or  if  the  rate 
of  interest  adopted  should  not  be  realized  throughout  a  long  period 
of  years,  there  is  still  a  further  safeguard  involved  in  the  recommen- 
dations. The  plan  provides  that  in  all  cases  where  the  employe  enters 
the  police  or  fire  service  on  or  before  age  42  or  any  other  service  on 
or  before  age  50,  the  annuity  rights  of  the  employe  will  be  determined 
and  fixed  when  the  employe  attains  age  57  if  he  be  a  policeman  or 
a  fireman,  or  age  65  if  he  be  in  any  other  branch  of  the  service.  When 
the  employe  enters  after  such  age,  the  annuity  rights  are  determined 
at  the  end  of  the  fifteenth  year  of  service.  The  Commission  believes, 
from  past  experience,  that  so  many  will  remain  in  service  beyond  the 
age  stated,  and  thus  not  take  their  annuities  as  soon  as  the  maximum 
amount  of  annuity  becomes  available,  that  the  funds  accumulated  will 
be  ample  to  provide  the  annuities  promised  according  to  the  table  of 
mortality  and  rate  of  interest  adopted. 
A  Still  Further  Safeguard 

In  this  belief,  however,  it  may  be  mistaken,  so  a  further  safeguard 
is  recommended.  The  proposed  plan  provides  that  the  city  shall  pay 
into  each  fund,  certain  sums  until  all  annuities  become  payable  on  a 
reserve  basis.  Until  all  such  payments  are  made,  part  of  these  pay- 
ments may  be  diverted  to  make  up  any  deficiency,  if  such  should 
occur,  through  the  specified  table  of  mortality  and  rate  of  interest 
proving  inadequate. 

At  the  same  time,  until  all  such  payments  are  made,  any  surplus 
accruing  because  of  the  adoption  of  such  standards  will  go  to  shorten 
the  period  during  which  these  payments  are  necessary. 

When  the  system  finally  comes  to  a  full  reserve  basis,  enough 
time  will  have  elapsed  to  enable  the  city  to  work  out  for  itself  a 
mortality  table  founded  on  its  own  experience. 

To  reduce  losses  from  investments  to  a  minimum,  the  Commission 
recommends  the  prescribing  of  the  classes  of  securities  outside  of 
which  no  funds  can  be  invested.  At  the  same  time  it  recommends 

26 


GENERAL   OUTLINE    OF    PLAN 

that  the  Commission  pass  upon  each  issue  of  securities  within  the 
classes  prescribed  in  the  Acts  before  securities  of  such  issue  may 
be  purchased. 

To  guard  against  a  disbursement  of  the  funds  for  purposes  other 
than  those  for  which  they  were  created,  all  moneys  paid  in  are  set 
aside  for  certain  purposes,  and  no  funds  can  be  withdrawn  other  than 
relatively  small  amounts  of  free  surplus,  without  robbing  some  person 
or  group  of  persons  of  funds  actually  allocated  to  him  or  them. 

Proposed  Plan  in  General  Outline 

In  general  outline,  the  proposed  plan  is  as  follows: 
Classes  of  Benefits  Provided 

Each  proposed  system  provides  for  five  classes  of  benefits,  namely : 

1.  Age  and  Service  Annuities  for  employes. 

2.  Widows'  Annuities  for  widows  of  employes. 

3.  Children's  Annuities  for  children  of  employes  who  die  while 
in  service. 

4.  Benefits  in  cases  of  sickness  or  injury  not  incurred  in  the 
performance  of  duty. 

5.  Benefits   in  cases  of  injury  or  death   incurred   in  or  as   a 
result  of  the  performance  of  duty. 

Method  of  Raising  Funds  to  Provide  Age  and  Service  Annuities 

The  method  of  raising  funds  to  provide  Age  and  Service  Annuities 
is  as  follows: 
For  Employes  Who  Enter  Service  on  or  after  January  1,  1922 

From  each  payment  on  account  of  salary  of  each  such  employe, 
3  per  cent  is  deducted,  until  the  "employe  attains  age  57  if  he  be  a 
policeman  or  a  fireman,  or  age  65  if  he  belong  to  any  other  branch 
of  the  service.  In  the  few  cases  where  an  employe  enters  the  police 
or  fire  service  at  an  older  age  than  42  or  any  other  service  at  an 
older  age  than  50,  deductions  continue  for  fifteen  years,  if  'the  employe 
remains  in  service. 

With  each  contribution  of  the  employe,  the  city  contributes  9  per 
cent  of  the  salary  of  the  employe  if  he  be  a  policeman  or  a  fireman, 
or  6  per  cent  of  his  salary  if  he  belong  to  any  other  branch  of  the 
service. 

The  amounts  thus  contributed  are  allocated  to  the  employe  when 
paid,  and  are  improved  periodically  at  interest  at  the  rate  of  4  per 
cent  per  annum.  When  the  employe  resigns  or  is  dismissed  from 
service,  or  dies  while  in  service,  the  amount  thus  accumulated  is  used 
in  whole  or  part  to  provide  annuity  according  to  specified  provisions 
as  stated,  or,  in  case  no  annuity  is  granted,  then  refund  will  be  made 

27 


of  the  accumulation  from  the  employe's  own  contributions  as  stated 

hereinafter. 

For  Employes  Who  Shall  be  in  the  Service  on  January  1,  1922 

Each  such  employe  contributes  3  per  cent  of  salary,  if  he  remains 
in  serVice,  until  he  has  contributed  an  amount  equal  to  that  which  he 
would,  have  contributed  if  he  had  been  under  the  provisions  of  the 
proposed  act  since  the  beginning  of  his  service  with  a  salary  for 
service  rendered  prior  to  January  1,  1922,  equal  to  that  which  he 
will  be  receiving  on  such  date. 

The  city  contributes  9  per  cent  of  the  salary  of  the  employe  as 
of  January  1,  1922,  if  he  be  a  policeman  or  a  fireman,  or  6  per  cent 
if  he  belong  to  any  other  branch  of  the  service,  until  the  employe 
attains  age  57,  if  he  be  a  policeman  or  a  fireman,  or  age  65  if  he 
belong  to  any  other  branch  of  the  service,  or  until  the  end  of  the 
fifteen-year  period  in  the  cases  of  employes  entering  at  the  older 
ages  as  stated.  When  an  employe  attains  such  age  or  has  completed 
such  period  of  service,  the  city  ceases  to  contribute  on  his  behalf. 

In  addition,  the  city  assumes  two  further  obligations  for  the 
benefit  of  employes  who  shall  have  entered  the  service  before  January 
1,  1922: 

1.  It   assumes   as   an   obligation   to   provide   Age   and   Service 
Annuities  for  such  employes,  of  such  amounts  as  can  be  provided 
from  an  amount  equal  to  the  accumulation  that  would  have  been  to 
the  credit  of  the  employe  on  January  1,  1922,  from  contributions  of 
the  city,  if  the  city  had  been  contributing  according  to  this  plan  from 
the  beginning  of  the  employe's  service,  and  the  salary  of  the  employe 
during  the  period  of  service  before  January  1,  1922,  was  that  which 
it  will  be  on  such  date. 

2.  It   assumes   as   an   obligation   to   provide   Age   and    Service 
Annuities  for  employes  in  service  on  January  1,  1922,  of  such  amounts 
as  can  be  provided  from  the  contributions  which  employes  made  to 
existing  pension  or  annuity  funds  with  interest  at  the  rate  of  4  per 
cent  per  annum. 

An  employe  who  will  be  in  service  on  January  1,  1922,  will  thus 
receive  an  Age  and  Service  Annuity  made  up  from  accumulations 
from  contributions  from  one  to  four  sources,  namely: 

1.  Contributions  made  by  himself  on  and  after  January  1,  1922. 

2.  Contributions  made  by  the  city  for  him  because  of  service 
rendered  on  and  after  January  1,  1922. 

3.  Contributions  made  by  the  city  for  him  because  of  service 
rendered  before  January  1,  1922. 

4.  Contributions  made  by  the  employe  to  existing  pension  funds. 
There  are  provisions  in  the  plan  that  any  annuity  provided  from 

the  sources  stated  above  shall  not  exceed  the  amount  which  the  employe 

28 


GENERAL   OUTLINE    OF   PLAN 

would  receive  if  he  had  been  under  the  provisions  of  the  plan  from 
the  beginning  of  his  service  with  a  salary  for  service  rendered  before 
January  1,  1922,  equal  to  that  received  on  such  date,  except  that  if 
the  employe  be  a  policeman  or  a  fireman  who  will  be  in  service  on 
December  31,  1920,  he  will  receive  the  benefit  provided  in  this  present 
act  when  such  would  be  greater  than  that  which  would  be  received 
under  the  proposed  plan. 

Method  of  Raising  Funds  to  Provide  Widows'  Annuities 

The  method  of  raising  funds  to  provide  Widows'  Annuities  is 
as  follows:  s 

For  Widows  of  Employes  who  enter  the  Service  on  or  after  January 
1,  1922 

With  every  deduction  from  salary  for  Age  and  Service  Annuity 
from  each  man  employe  who  will  enter  the  service  on  or  after  January 
1,  1922,  is  made  an  additional  deduction  of  1  per  cent  of  salary  to 
provide  annuity  for  a  possible  widow  of  such  employe.  These  deduc- 
tions are  made  whether  the  employe  is  married  or  not. 

With  each  contribution  of  the  employe,  the  city  contributes  2^ 
per  cent  of  salary  of  the  employe  if  he  be  a  policeman  or  a  fireman, 
or  2  per  cent  of  salary  if  he  belong  to  any  other  branch  of  the  service. 

The  amounts  thus  contributed  are  allocated  to  the  employe  for  a 
Widow's  Annuity,  when  paid,  and  are  improved  periodically  at  interest 
at  the  rate  of  4  per  cent  per  annum. 

If  the  employe  has  a  wife  living  when  he  attains  age  57  if  he 
be  a  policeman  or  a  fireman,  or  age  65  if  he  belong  to  any  other 
branch  of  the  service,  having  had  at  least  15  years  of  service,  the 
accumulation  to  his  credit  for  Widow's  Annuity  purposes  will  be  used 
to  provide  such  wife  with  a  Widow's  Annuity. 

If  an  employe  has  no  wife  living  upon  attainment  of  such  age, 
the  employe  and  the  city  will  receive  refund  of  the  accumulation  from 
his  and  its  contributions  for  a  Widow's  Annuity,  and  if  the  employe 
should  afterward  marry,  such  wife  will  not  be  eligible  for  annuity. 

If  an  employe  attains  age  57  in  the  police  or  fire  service  or  age 
65  in  any  other  branch  of  the  service,  not  having  had  at  least  15  years 
of  service  to  his  credit,  if  he  has  a  wife,  contributions  on  her  behalf 
will  continue  if  the  employe  remains  in  service  until  he  has  completed 
15  years  of  service,  or  until  her  death,  whichever  event  shall  first 
occur.  If  she  should  die  while  he  is  in  service  and  before  he  com- 
pletes his  15  years  of  service,  the  employe  and  the  city  will  receive 
refund  of  the  accumulation  from  his  and  its  contributions  for  a 
Widow's  Annuity,  and  if  the  employe  should  afterward  marry,  such 
wife  will  not  be  eligible  for  annuity. 

29 


GENERAL   OUTLINE    OF    PLAN 

For  Widows  of  Employes  who  shall  be  in  Service  on  January  1,  1922 

Each  man  employe  contributes  1  per  cent  of  salary  whenever  he 
makes  a  contribution  for  his  own  Age  and  Service  Annuity,  except 
that  if  he  has  no  wife  when  he  attains  age  57  if  he  be  a  policeman 
or  a  fireman,  or  age  65  if  he  belong  to  any  other  branch  of  the 
service,  he  shall  cease  to  contribute  for  a  Widow's  Annuity. 

If  on  January  1,  1922,  he  shall  have  attained  at  least  such  age 
and  have  no  wife  living,  he  will  not  be  permitted  to  contribute  for  a 
Widow's  Annuity. 

The  city  assumes  as  an  obligation  the  payment  in  annuity  of 
such  an  amount  as  would  be  provided  from  the  accumulation  that 
would  be  to  the  credit  of  the  employe  on  January  1,  1922,  for  a 
Widow's  Annuity  from  contributions  of  both  the  city  and  the  employe, 
if  each  had  been  contributing  under  the  provisions  of  the  proposed 
plan  from  the  beginning  of  the  employe's  service,  and  the  salary  of 
the  employe  for  service  rendered  before 'January  1,  1922,  was  the 
same  as.  it  will  be  on  such  date. 

For  service  rendered  after  January  1,  1922,  the  city  contributes 
2y2  per  cent  of  the  salary  ,of  the  employe  if  he  be  a  policeman  or  a 
fireman,  or  2  per  cent  of  salary  if  he  belong  to  any  other  branch 
of  the  service,  until  the  employe  attains  age  57  in  the  case  of  a 
policeman  or  a  fireman,  or  age  65  in  any  other  case. 

If  the  employe  has  a  wife  living  when  he  attains  such  age,  having 
had  at  least  15  years  of  service,  the  accumulation  to  his  credit  for 
Widow's  Annuity  purposes  will  be  used  to  provide  such  wife  with  a 
Widow's  Annuity. 

If  an  employe  has  no  wife  living  upon  attainment  of  such  age, 
the  employe  and  the  city  will  receive  refund  of  the  accumulation  from 
his  and  its  contributions  for  a  Widow's  Annuity,  and  if  the  employe 
should  afterward  marry,  such  wife  will  not  be  eligible  for  annuity. 

The  provisions  relating  to  those  who  will  not  have  had  15  years 
of  service  upon  attainment  of  age  57  or  age  65  are  the  same  as  those 
stated  above  in  like  cases  where  employes  will  enter  the  service  on 
or  after  January  1,  1922. 

As  in  the  case  of  Age  and  Service  Annuities,  there  is  in  each 
plan  a  provision  that  the  annuity  which  any  widow  of  an  employe 
who  will  be  in  service  on  January  1,  1922,  will  receive  will  not  exceed 
that  which  she  would  receive  if  her  husband  had  been  under  the  pro- 
visions of  this  plan  from  the  beginning  of  his  service  with  a  salary 
for  service  rendered  before  January  1,  1922,  equal  to  that  which  he 
will  receive  on  January  1,  1922.  There  is  an  exception  to  this  in 
cases  of  widows  and  other  dependents  of  policemen  and  firemen  who 
will  be  in  service  on  December  31,  1920.  In  any  such  case,  such 

30 


GENERAL   OUTLINE    OF   PLAN 

dependents  would  receive  the  benefits  provided  in  the  present  Act 
when  such  would  be  greater  than  those  which  they  would  receive 
under  the  proposed,  plan. 

General  Outline  Regarding  Provisions  for  Payment  of  Age  and 
Service  Annuities  and  Widows'  Annuities 

The  provisions  regarding  payment  of  Age  and  Service  Annuities 
and  Widows'  Annuities  are  given  in  general  outline  as  follows: 

Illustrative  examples  are  given  in  Chapter  V. 

After  Employe  Attains  Age  57  or  Age  65  While  in  Service 

After  an  employe  attains  age  57  in  the  police  or  fire  service,  or 
age  65  in  any  other  service,  all  the  accumulation  from  contributions 
both  by  himself  and  the  city  for  Age  and  Service  Annuity  become 
available  to  provide  him  with  such  annuity.  Also  all  the  accumulation 
from  contributions  both  by  himself  and  the  city  for  a  Widow's  Annuity 
become  available  to  provide  his  wife  with  a  Widow's  Annuity. 

If  he  enters  the  service  on  or  after  January  1,  1922,  the  amount 
available  for  Age  and  Service  Annuity  and  for  a  Widow's  Annuity 
will  be  the  accumulations  to  his  credit  for  such  annuities  when  he 
attains  age  57  if  he  be  a  policeman  or  a  fireman,  or  age  65  if  he 
be  an  employe  in  any  other  branch  of  the  service,  provided  he  has 
at  that  time  at  least  15  years  of  service  to  his  credit.  If  he  has  less 
than  15  years  of  service  to  his  credit,  the  maximum  accumulations 
to  provide  him  with  an  Age  and  Service  Annuity  and  his  wife  with 
a  Widow's  Annuity  will  be  the  accumulations  to  his  credit  for  such 
purposes  at  the  end  of  his  fifteenth  year  of  service. 

If  he  will  have  been  in  service  before  January  1,  1922,  the  max- 
imum accumulations  to  his  credit  for  Age  and  Service  Annuity  and 
for  Widow's  Annuity  will  not  be  those  to  his  credit  when  he  attains 
age  57  or  age  65  or  at  the  end  of  the  fifteenth  year  of  service  as 
the  case  may  be,  if  he  remains  in  service,  but  will  be  those  which 
can  provide  him  and  his  wife  with  annuities  equal  to  those  which 
they  would  receive  if  he  had  been  under  the  provisions  of  this  plan 
from  the  beginning  of  his  service  with  a  salary  for  service  rendered 
before  January  1,  1922,  equal  to  that  which  he  will  receive  on  such  date. 

An  Age  and  Service  Annuity  can  only  begin  upon  resignation  or 
dismissal  of  the  employe  from  service,  and  a  Widow's  Annuity  upon 
death  of  the  employe. 
Before  Employe  Attains  Age  57  or  Age  65  While  in  Service 

The  discussion  under  this  head  divides  itself  naturally  into  three 
parts: 

First.  If  the  employe  resigns  or  is  dismissed  from  service  after 
at  least  ten  years  of  service  and  after  attainment  of  age  50  if  he  be 

31 


GENERAL    OUTLINE    OF    PLAN 

a  policeman  or  a  fireman,  or  age  55  if  he  belong  to  any  other  branch 
of  the  service. 

In  any  such  case,  the  employe  will  enter  upon  Age  and  Service 
Annuity  immediately,  the  amount  of  such  annuity  being  that  which 
can  be  provided  as  of  his  attained  age  on  date  of  resignation  or 
dismissal  from  service,  from: 

a)  The  accumulation  to  his  credit  for  Age  and  Service  Annuity 
from  his  own  contributions  for  such  purpose,  and 

b}  One-tenth  of  the  accumulation  to  his  credit  for  Age  and 
Service  Annuity  from  contributions  of  the  city  for  such  purpose  for 
each  complete  year  of  service  rendered  in  addition  to  ten  complete 
years  of  service. 

The  wife  of  any  such  employe  will  receive  as  a  Widow's  Annuity 
that  which  can  be  provided  from  the  accumulation  to  the  credit  of 
her  husband  from  his  own  contributions  for  such  purposes  and  one- 
tenth  of  the  accumulation  from .  contributions  of  the  city  for  such 
purposes  for  each  year  of  service  rendered  in  addition  to  ten  complete 
years  ,of  service. 

In  computing  these  annuities,  the  rate  of  interest  will  be  assumed 
to  be  4  per  cent  per  annum. 

In  any  such  case  the  remainder  of  the  accumulation  from  con- 
tributions of  the  city  not  used  for  the  purposes  stated  will  be  refunded 
to  the  city. 

Second.  If  an  employe  resigns  or  is  dismissed  from  service  after 
at  least  ten  yea"rs  of  service  and  before  attainment  of  age  50,  if  he 
be  a  policeman  or  a  fireman,  or  age  55  if  he  belong  to  any  other  branch 
of  the  service. 

In  any  such  case,  the  employe  will  be  entitled  to  refund  of  the 
accumulation  from  his  own  contributions  for  Age  and  Service 
and  for  Widow's  Annuity  purposes,  but  if  he  so  elects,  he  may  leave 
such  accumulation  in  the  fund.  If  he  does  so,  it  will  henceforth 
earn  interest  at  the  rate  of  3^  per  cent  per  annum  until  he  attains 
age  50  if  he  was  a  policeman  or  a  fireman  or  until  he  attains  age  55 
if  he  was  an  employe  in  any  other  branch  of  the  service.  At  such 
time,  the  accumulation  to  his  credit  from  his  own  contributions  plus 
one-tenth  of  the  accumulation  from  contributions  of  the  city,  similarly 
improved  at  interest,  for  each  complete  year  of  service  rendered  in 
addition  to  ten  complete  years  of  service,  will  be  used  to  provide  him 
with  an  annuity  upon  which  he  can  then  enter. 

Also,  the  accumulation  from  his  own  contributions  and  from  those 
of  the  city  for  a  Widow's  Annuity  will  be  used  in  a  similar  manner 
to  provide  his  wife  with  a  Widow's  Annuity,  if  he  was  married  to 
her  before  he  resigned  or  was  dismissed  from  service. 

32 


GENERAL   OUTLINE   OF   PLAN 

In  computing  these  annuities,  the  rate  of  interest  will  be  assumed 
to  be  $l/2  per  cent  per  annum. 

Third.  If  an  employe  resigns  or  is  dismissed  from  service  before 
completion  of  at  least  ten  years  of  service  while  still  under  the  age 
of  57  if  he  be  a  policeman  or  a  fireman,  or  age  65  if  he  belong  to 
any  other  branch  of  the  service. 

In  any  such  case  the  employe  will  be  entitled  to  refund  of  the 
accumulation  from  his  own  constributions  for  Age  and  Service 
Annuity  and  for  Widow's  Annuity  purposes.  If  he  does  not  accept 
refund,  his  accumulation  will  henceforth  bear  interest  at  the  rate  of 
Zl/2  per  cent  per  annum  until  he  attains  age  57  if  he  was  a  policeman 
or  a  fireman,  or  age  65  if  he  belonged  to  any  other  branch  of  the 
service,  and,  if  he  returns  to  service,  such  accumulation  and  the  accu- 
mulation from  contributions  of  the  city  for  such  purposes,  similarly 
improved  at  interest,  will  be  to  his  credit.  If  he  does  not  return 
to  service  before  attainment  of  such  age,  refund  of  the  accumulation 
to  his  credit  at  such  time  will  be  made  to  him. 

Provisions  affecting  Widows'  Annuities  When  an  Employe  Dies 

While  in  Service 

If  an  employe  dies  while  in  service  before  his  accumulation  is 
sufficient  to  provide  him  with  a  maximum  annuity  or  if  he  dies  after 
withdrawal  from  service  and  before  entering  upon  annuity  as  stated 
under  the  third  heading  hereinbefore,  all  the  accumulation  to  his  credit 
on  the  date  of  his  death  both  for  Age  and  Service  Annuity  and  for 
Widow's  Annuity  purposes  will  be  used  to  provide  his  widow  with 
an  annuity  except  that  the  contributions  of  the  city  for  such  purposes 
shall  be  used  only  to  such  an  extent  that  the  widow  will  not  receive 
an  annuity  greater  than  that  which  she  would  receive  if  her  husband 
had  lived  to  the  date  when  the  maximum  amount  of  his  annuity 
would  be  fixed  and  had  entered  upon  annuity. 

Refunds  to  City 

In  all  cases  where  the  accumulation  from  contributions  of  the 
city  or  any  part  of  it  is  not  used  to  provide  annuities,  refund  of  the 
whole  or  such  unused  part  shall  be  made  to  the  city  in  the  form  of 
a  credit  to  reduce  the  amount  which  the  city  would  otherwise  need 
to  pay  during  the  following  year.  This  applies  only  after  the  fund 
is  placed  on  a  reserve  basis.  During  the  accumulation  period,  these 
refunds  would  apply  to  diminish  the  period  of  accumulation  necessary 
to  place  these  funds  on  a  reserve  basis. 

Children's  Annuities 

The  plan  provides  for  annuities  to  children  under  18  years  of 
age  who  are  the  issue  of  employes  who  die  while  in  service  after  at 

"  33 

i 


GENERAL    OUTLINE    OF    PLAN 

least  4  years  of  service  or  while  on  annuity.  For  further  particulars 
see  Chapter  IV. 

The  amount  of  annuity  provided  in  such  case  is  $15.00  per  month 
for  each  such  child  if  no  wife  of  the  employe  survives,  or  if  a  sur- 
viving wife  dies  while  the  children  are  under  18  years  of  age,  and 
$10.00  per  month  if  a  wife  of  the  employe  survives. 

It  is  proposed  that  these  payments  be  made  currently  as  the 
obligation  matures. 

The  entire  cost  of  these  annuities  would  be  borne  by  the  city. 

Benefits  in  Cases  of  Sickness  or  Injury  Not  Incurred  in  the  Per- 
formance of  Duty 

The  plan  provides  for  disability  benefits  of  50  per  cent  of  salary 
while  the  employe  is  under  the  age  of  57  in  the  cases  of  policemen 
or  firemen,  or  age  65  in  other  cases,  or  until  the  completion  of  the 
period  of  15  years  of  service  for  employes  of  older  ages. 

These  benefits  will  begin  when  the  employe  ceases  to  draw  salary, 
but  not  earlier  than  15  days  after  the  beginning  of  the  disability,  and 
will  extend  for  the  period  of  disability,  but  not  to  exceed  a  period 
equal  to  one-quarter  of  the  period  of  service  of  the  employe  nor  in 
any  case  five  years. 

During  any  such  period  when  the  employe  is  in  receipt  .of  dis- 
ability benefits  he  will  keep  up  contributions  for  Age  and  Service 
Annuity  and  Widow's  Annuity  purposes,  so  that  the  net  income  avail- 
able to  him  will  be  46  per  cent  of  salary  in  cases  .of  men  and  47 
per  cent  in  cases  of  women. 

During  such  period,  the  city  will  keep  up  its  contributions  for 
Age  and  Service  Annuity  and  for  Widow's  Annuity  purposes  so  that 
the  amounts  of  such  annuities  will  not  become  impaired  while  the 
employe  is  in  receipt  of  disability  benefits. 

During  the  year  1922  employes  eligible  for  such  benefits  would 
contribute  therefor  one-half  of  one  per  cent  of  salary  and  the  city 
would  contribute  one-half  of  one  per  cent  of  salary.  Thereafter, 
the  employes  would  contribute  one-half  of  the  cost  of  such  benefits 
and  the  employer  one-half.  It  is  proposed  that  the  city  make  pay- 
ment yearly  for  its  share  of  the  payment  of  such  benefits  and  the 
employes  make  payment  by  deduction  from  each  payment  on  account 
of  salary. 

Benefits  in  Cases  of  Injury  or  Death  Incurred  in  or  as  a  Result  of 
the  Performance  of  Duty 

The  plan  provides  for  disability  benefits  for  all  employes  of  55 
per  cent  of  salary  while  the  employe  is  under  the  age  of  57  in  the 
cases  of  policemen  and  firemen,  or  age  65  in  other  cases,  or  until 

34 


GENERAL   OUTLINE    OF   PLAN 

the  completion  of  the  period  of  15  years  of  service  for  employes  of 
older  age. 

These  benefits  will  begin  when  the  employe  ceases  to  draw  salary 
and  will  extend  during  disability  until  the  employe  attains  the  age 
stated  or  has  completed  15  years  of  service,  counting  the  period  of 
such  disability  as  a  period  of  service,  as  stated  in  the  preceding 
paragraph. 

During  any  such  period  of  disability  the  city  will  keep  up  the 
contributions  for  Age  and  Service  Annuity  and  Widow's  Annuity 
purposes  that  were  being  made  by  the  employe  and  city  at  the  time 
of  disability  so  that  the  amounts  of  such  annuities  will  not  become 
impaired  by  reason  of  such  disability. 

If  an  employe  is  killed  while  in  performance  .of  duty  or  receives 
injuries  while  in  performance  of  duty  from  which  he  afterwards  dies, 
his  widow,  if  she  does  not  remarry,  will  receive  an  annuity  of  that 
which  would  be  provided  for  her  if  her  husband  had  lived  to  age 
57  in  the  case  of  a  policeman  or  a  fireman,  or  age  65  in  the  case  of 
any  other  employe,  or  to  the  end  of  the  15-year  period  of  service, 
and  had  in  the  meantime  the  salary  he  had  at  the  time  when  death 
or  disability  occurred. 

If  she  remarries,  her  annuity  after  remarriage  will  be  that  which 
she  would  have  received  if  her  husband  had  died  from  injuries  not 
incurred  in  performance  of  duty.  An  annuity  in  any  case  is  subject 
to  reduction  because  of  benefits  that  may  be  received  under  the 
Workmen's  Compensation  Act. 

If,  however,  such  annuity  would  be  less  than  50  per  cent  of  the 
employe's  salary,  she  will  receive  an  annuity  of  50  per  cent  of  the  em- 
ploye's salary  until  such  time  as  her  husband,  if  he  were  alive,  would 
have  attained  age  57,  or  age  65,  or  would  have  served  to  the  end  of  the 
15-year  period  of  service. 

The  entire  cost  of  benefits  in  cases  of  injury  or  death  incurred 
in  or  as  a  result  of  the  performance  of  duty  will  be  borne  by  the  city. 
It  is  proposed  that  payment  for  these  benefits  be  made  yearly  by  the 
city  and  only  in  amounts  necessary  to  defray  the  expenses  incurred 
during  the  year. 


35 


CHAPTER  III 


COST  OF  MAINTAINING  THE  SYSTEM  IN  ACCORDANCE 
WITH   THE    PROPOSED    PLAN 


This  chapter  is  devoted  to  a  statement  of  the  cost,  to  employes 
and  to  the  city,  of  maintaining  the  system  in  accordance  with  the 
proposed  plan. 

Cost  to  Employes 

The  cost  to  employes,  stated  in  percentages  of  salaries,  would  be: 

Men  Women 

Percentage  Percentage 

For  Age  and  Service  Annuity  for  employe 3.00  3.00 

For  Widow's  Annuity  for  wife  ef  employe 1.00  0.00 

For  Disability  Benefits  in  cases  of  sickness  or  injury  not 

incurred  in  performance  of  duty 50  .50 

For  expense  of  administration 125  .125 


Totals  (expressed  in  percentages  of  salaries) 4.625  3.625 

In  the  foregoing,  the  cost  of  disability  benefits  is  an  estimate 
based  on  the  supposition  that  the  payment  of  benefits  would  begin 
15  days  after  the  sickness  began  or  after  the  injury  occurred  and  would 
continue  only  during  actual  disability.  On  this  supposition,  the  actual 
cost  under  an  operation  of  the  system  would  not  differ  materially  from 
the  estimate  made. 

If  the  payment  of  benefits  were  to  begin  earlier  than  15  days  after 
the  beginning  of  the  sickness  or  the  date  of  the  injury,  or  if  malinger- 
ing should  occur  to  any  great  extent,  the  cost  would  be  greater  than 
the  estimate. 

The  percentages  stated  above  would  be  payable  under  the  follow- 
ing conditions: 

Employes  Who  Enter  the  Service  after  January  1,  1922 

All  such  employes  would  contribute  for  Age  and  Service  Annuities 
from  dates  of  entrance  into  service  until  attainment  of  age  57,  in 
the  cases  of  policemen  and  firemen,  or  until  attainment  of  age  65 
in  all  other  cases ;  except  that  those  who  enter  the  police  or  fire  service 
after  attainment  of  age  42,  or  any  other  branch  of  the  service  after 
attainment  of  age  50,  would  contribute  for  15  years  if  they  remain 
in  service  for  that  length  of  time. 

All  such  men  would  also  contribute  for  Widows'  Annuities  when 
they  contributed  for  Age  and  Service  Annuities,  whether  married  or 
not;  except  that  no  policeman  or  fireman  would  contribute  for  a 
Widow's  Annuity  after  he  attained  age  57,  or  no  one  belonging  to 
any  other  branch  of  the  service  after  he  attained  age  65,  if  he  had  no 

36 


COST   OF    MAINTAINING    SYSTEM 

^wife  living  upon  attainment  of  such  age.  And  such  employe  would 
cease  contributing  for  a  Widow's  Annuity  upon  death  of  his  wife  if 
she  should  die  after  he  attained  such  age  and  during  his  contribution 
pefiod. 

Contributions  for  Sickness  and  Accident  Benefits  would  cease 
when  the  employe  attained  age  57  in  the  police  or  fire  services  or 
age  65  in  any  other  branch  of  the  service,  if  he  will  have  had  at  least 
15  years  of  service  to  his  credit.  If  he  will  have  had  less  than  15  years 
of  service  to  his  credit,  his  contributions  will  continue,  if  he  remains  in 
service,  to  the  end  of  the  15-year  period  of  service.  Contributions  for 
Cost  of  Administration  would  continue  as  long  as  the  employe  was 
contributing  for  Age  and  Service  Annuity. 

Employees  Who  will  be  in  Service  on  January  1,  1922 

All  such  employes  would  contribute  for  Age  and  Service  Annuities 
from  January  1,  1922,  until  they  attained  age  57  or  age  65  or  to  the 
end  of  the  15-year  period  as  stated  heretofore  for  those  who  enter  the 
service  after  January  1,  1922.  They  would  also  contribute  afterward, 
provided  they  remained  in  service,  each  until  he  had  contributed  an 
amount  which,  improved  at  interest  at  the  rate  of  4  per  cent  per  annum 
and  taken  with  the  amounts  contributed  to  existing  pension  funds, 
similarly  improved  at  interest,  would  be  equal  to  the  amounts  he  would 
have  paid,  similarly  improved  at  interest,  if  he  had  been  under  the  pro- 
visions of  the  proposed  plan  from  the  beginning  of  his  service,  with 
a  salary  for  service  rendered  before  January  1,  1922,  equal  to  that 
being  received  on  January  1,  1922. 

For  a  Widow's  Annuity,  all  such  men  employes  would  contribute 
the  percentage  stated,  when  they  contributed  for  Age  and  Service 
Annuity,  except  that  if  any  such  employe  had  no  wife  living  when 
he  attained  age  57  or  age  65  as  the  case  may  be,  he  would  then  cease 
to  contribute  for  a  Widow's  Annuity,  and  if  his  wife  should  die 
after  he  attained  such  age  and  while  he  was  still  contributing  for  Age 
and  Service  Annuity,  he  would  then  cease  contributing  for  a  Widow's 
Annuity. 

The  provisions  regarding  contributions  for  Sickness  and  Accident 
Benefits  and  for  Cost  of  Administration  would  be  the  same  as  those 
stated  above  for  employes  who  enter  the  service  after  January  1,  1922. 
Refunds 

Refunds  of  contributions  as  explained  in  Chapter  IV  apply  only 
to  contributions  for  Age  and  Service  Annuity  and  Widow's  Annuity. 
They  do  not  apply  to  contributions  for  Sickness  and  Accident  Benefits 
or  for  Cost  of  Administration. 

37 


COST   OF    MAINTAINING   SYSTEM 

Cost  to  City  under  Proposed  System 

Under  the  proposed  system,  the  city  would  contribute  for  four 
distinct  purposes,  as  follows: 

First.  It  would  contribute  to  make  up  the  deficits,  in  the  police- 
men's and  firemen's  present  funds,  of  the  amounts  required  to  pay 
pensions  to  those  on  pension  on  January  1,  1922,  and  to  their  depend- 
ents, over  the  amounts  actually  on  hand  at  that  time. 

These  deficits  on  January  1,  1922,  were  equivalent  to  amounts 
on  hand  on  that  date  as  shown  in  Chapter  VII,  as  follows : 

In  Policemen's  Fund $   701,491 

In  Firemen's  Fund 1,037,397 


Total $1,738,888 

Assuming  that  the  balances  in  the  funds  on  that  date  will  be 
$225,000  in  each  fund,  the  resulting  deficit  under  the  first  head  will 
be  $1,288,888. 

Second.  The  city  would  contribute  amounts  equal  to  an  amount 
on  hand  on  January  1,  1922,  sufficient  to  credit  each  employe  in  service 
on  said  date  with  contributions  made  to  existing  pension  funds,  with 
interest  from  the  date  of  contribution  to  said  date  at  the  rate  of  4 
per  cent  per  annum,  after  the  surplus  in  any  such  fund,  when  a  proper 
amount  is  reserved  to  provide  pensions  for  those  on  the  pension  rolls 
at  that  time  and  their  dependents  under  the  conditions  of  the  present 
acts,  is  used  for  such  purpose  as  far  as  it  will  extend.  These  amounts 
would  be  payable  in  the  form  of  annuities. 

The  amounts  required  for  such  purposes  would  be  substantially 
equivalent  to  amounts  on  hand  on  January  1,  1922,  as  follows: 

For  Policemen's  Fund $320,704 

For  Firemen's  Fund 335,085 

For  Public  School  Teachers'  Annuity  and  Retirement  Fund 7,984 


Total $663,773 

Third.  The  city  would  provide,  in  the  form  of  annuities  for  each 
employe  in  service  on  January  1,  1922,  and  for  his  dependents,  in 
accordance  with  the  provisions  of  the  proposed  plan,  an  amount  equal 
to  that  which  would  be  to  the  credit  of  such  employe  from  contribu- 
tions of  the  city  and  the  employe  for  a  Widow's  Annuity,  if  the 
employe  had  been  under  the  provisions  of  the  proposed  plan  from 
the  beginning  of  his  service  with  a  salary  for  service  rendered  prior 
to  January  1,  1922,  equal  to  that  being  received  on  January  1,  1922. 
Such  annuities  are  known  as  Prior  Service  Annuities. 

The  city  would  also  provide  for  those  in  the  police  and  fire 
services  on  January  1,  1921,  in  the  form  of  annuities,  the  extra  amounts 
required  to  give  such  employes  and  their  dependents  the  pensions 

38 


COST   OF    MAINTAINING    SYSTEM 

provided  in  their  present  act  when  such  pensions  would  exceed  those 
otherwise  provided  under  the  proposed  plan. 

The  amounts  required  for  such  purposes,  after  account  is  taken 
of  refunds  to  the  city  as  stated  hereinafter,  would  be  substantially 
equivalent  to  amounts  on  hand  on  January  1,  1922,  as  follows: 

For  Policemen's  Fund  $1,576,116 

For  Firemen's  Fund 1,671,849 

For  Public  School  Teachers'  Fund 1,985,647 

For  Municipal  Employes'  Fund '. 3,200,888 

Total .$8,434,500 

Summary  of  Costs  by  Funds  under  the  First,  Second  and  Third 
Heads 

The  cost  to  the  city  by  proposed  funds  under  the  first,  second, 
and  third  heads  would  thus  be: 


Policemen's 
Fund 
(CoL  1) 
Deficiency  on  account  of  pensioners 
of  1/1/20  $  476,491 

Firemen's 
Fund 
(Col.   2) 

$  812397 

Public 
School       Municipal 
Teachers'    Employes' 
Fund             Fund 
(Col.   3)        (CoL  4) 

$..                   $.. 

Deficiency   on    account   of   contribu- 
tions of  employes  in  service  1/1/22     320,704 

335,085 

7,984 

For  Prior  Service  Annuities  1,576,116 

1,671,849 

1,985,647      3200,888 

Totals  $2,373,311 

$2,819,331 

$1,993,631    $3,200,888 

Grand  Total  of  Costs  . 

..$10.387.161 

Costs  Spread  over  40  Years 

It  is  proposed  that  these  amounts  be  raised  by  equal  annual  con- 
tributions over  a  period  of  years  until  each  fund  is  on  a  reserve  basis. 
Taking  this  period  as  40  years,  the  cost  to  the  city  each  year  for  such 
period,  assuming  interest  at  the  rate  of  4  per  cent  per  annum, 
would  be : 

For  Policemen's  Fund  $119,907  per  year 

For  Firemen's  Fund 142,442  per  year 

For  Public  School  Teachers'  Fund 100,725  per  year 

For  Municipal  Employes'  Fund 161,720  per  year 

Total  .  .  .  .' $524,794  per  year 

Fourth.  The  city  would  contribute  to  provide  its  share  of  the 
payments  for  annuities  and  other  benefits  granted,  under  the  provisions 
of  the  proposed  plan,  because  of  service  rendered  after  January  1, 
1922,  both  by  those  in  service  on  that  date  and  by  those  who  enter 
after  that  date. 

The  yearly  amounts  required  for  such  purposes  during  the  period 
when  sums  are  being  accumulated  to  place  the  funds  on  a  reserve  basis, 
would  be  as  follows: 

39 


COST   OF   MAINTAINING   SYSTEM 

• 

For  Policemen's  Fund  $126,318  per  year 

For  Firemen's  Fund 127,612  per  year 

For  Public  School  Teachers'  Fund 178,298  per  year 

For  Municipal  Employes'  Fund 238,562  per  year 

Total $670,790  per  year 

Yearly  Payments  by  the  City  after  the  Funds  Are  on  a  Reserve 
Basis 

After  a  sufficient  ^amount  is  accumulated  in  any  fund  to  place  it 
on  a  reserve  basis,  the  city  would  receive  refund  each  year^in  the 
form  of  a  credit  to  reduce  the  amount  it  would  otherwise  need  to  pay 
during  the  following  year,  of  the  amounts  reverting  to  it  in  refund. 

The  amounts  thus  reverting  to  the  credit  of  the  city  each  year 
after  the  funds  are  on  a  reserve  basis  would  not  be  less  than  those 
stated  below: 

Credit  from  Policemen's  Fund $13,500  per  year 

Credit  from  Firemen's  Fund 12,500  per  year 

Credit  from  Public  School  Teachers'  Fund 22,500  per  year 

Credit  from  Municipal  Employes'  Fund 25,000  per  year 

Total $73,500  per  year 

After  sufficient  amounts  are  accumulated  in  the  several  funds  to 
place  the  funds  on  a  reserve  basis,  the  city  would  therefore  be  paying 
for  pensions  the  sum  of  $670,790  less  $73,500  per  year,  or  $597,290 
per  year. 

'  These  payments  would  be  distributed  among  the  several  funds 
as  follows : 

To  Policemen's  Fund $112,818  per  year 

To  Firemen's  Fund 115,112  per  year 

To  Public  School  Teachers'  Fund 155,798  per  year 

To  Municipal  Employes'  Fund 213,562  per  year 


Total $597,290  per  year 

Summary  of  Annual  Payments  to  be  Made  by  the  City 

To  summarize  the  results  already  given: 

During  the  accumulation  period,  estimated  as  40  years,  the  city 
would  pay  each  year  under  an  operation  of  the  proposed  system,  sums 
as  follows: 

Public 

School  Municipal 

Policemen's     Firemen's       Teachers'  Employes' 

•  Fund                Fund                Fund  Fund 
Under  the  first,  second  and  third  head- 
ings  $119,907.    $142,442      $100,725  $161,720 

Under  fourth  heading  126,318        127,612        178,298  238,562 


Totals $246,225      $270,054      $279,023      $400,282 

Grand  Total  of  Yearly  Payments  for- 40  years $1,195,584 

40 


COST   OF   MAINTAINING    SYSTEM 

After  sufficient  funds  are  accumulated  to  place  the  system  on  a 
reserve  basis,  the  city  would  be  paying  for  pension  purposes,  the  sum 
of  $597,290  per  year. 

Pension  Payments  as  Percentages  of  the  Payroll 

The  above  figures  represent  pension  payments  in  percentages  of 
the  city's  payroll  on  January  1,  1920,  as  follows: 

During  the  Accumulation  Period,  13.9  per  cent  of  the  payroll. 
After  the  Accumulation  Period,  6.8  per  cent  of  the  payroll. 

Cost  to  City  Stated  under  Benefits  Offered  and  as  Percentages  of 
Salary 

The  cost  to  the  city,  stated  under  benefits  offered  and  as  per- 
centages of  salary,  would  be: 

Others 

Police  Fire  (Percentage) 

(Percentage)    (Percentage)  Men  Women 

For  Age  and  Service  Annuities 

for  Employes 9.00  9.00  6.00  6.00 

For  Widows'  Annuities 2.50  2.50  2.00  0.00 

For  Children's  Annuities 50  .50  .50  2S 

For   Disability   Benefits    in   cases   of 
sickness  or  injury  not  incurred  in 

performance  of  duty 50  .50  .50  .50 

For  Benefits  resulting  from  injury  or 
death  incurred  in,  or  as  a  result  of, 

performance  of  duty 1.00  1.00  .50 

For  Expense  of  Administration 25  .25  .25  .25 


Totals  (Expressed  in  Percentages 
of  salaries)    13.75  13.75  9.75  7.50 


41 


CHAPTER   IV 


MAIN  PROVISIONS  OF  PROPOSED  PLAN 


Four  Funds  Proposed 

For  the  payment  of  annuities  and  disability  benefits  to  employes 
of  the  city  and  their  dependents,  there  is  proposed  a  system  of  four 
funds,  distinct  from  each  other,  but  under  one  administrative  body, 
a"s  follows : 

a)  A  Policemen's  Annuity  and  Benefit  Fund 

b}  A  Firemen's  Annuity  and  Benefit  Fund 

c}  A  Public  School  Teachers'  Annuity  and  Benefit  Fund 

d)  A  General  Municipal  Employes'  Annuity  and  Benefit  Fund. 

Boards  of  Trustees 

Each  of  these  funds  would  be  administered  by  its  own  Board  of 
Trustees  constituted  as  follows: 

1.  Three  persons  elected  by  the  group  of  employes  concerned, 
one  to  be  elected  each  year  to  serve  for  a  period  ,of  three  years. 

2.  One  person  appointed  in  each  of  the  funds  a,  b,  and  d  by  the 
Mayor  of  the  city,  and  in  c  by  the  Board  of  School  Directors. 

3.  The  Chairman  of  the  Commission  as  explained  below. 

Commission 

For  purposes  of  administration  and  supervision,  a  commission  of 
three  members  would  be  appointed  by  the  Mayor,  one  to  be  appointed 
each  year  to  serve  for  a  period  of  three  years. 

Duties  of  Boards  of  Trustees 

Each  Board  of  Trustees  would  have  the  power  to  buy,  sell,  or 
transfer  securities  pertaining  to  its  own  fund,  except  that  securities 
could  be  purchased  only  upon  certification  by  the  Commission  that  they 
are  valid  and  secure  the  amount  invested. 

It  would  also  pass  on  all  claims  for  annuities  or  for  sickness  or 
accident  benefits  where  disability  did  not  result  from  performance  of 
duty.  Before  the  first  payment  on  account  of  annuity  or  benefits  was 
made,  the  approval  of  the  Commission  concerning  the  legality  of  the 
payment  would  be  necessary. 

It  would  have  the  power  to  appoint  its  own  physician  or 
physicians. 

42 


MAIN   PROVISIONS   OF   PLAN 

Duties  of  Commission 

The  Commission  would  keep  the  books  and  records  of  all  four 
funds,  and  employ  such  actuarial,  medical,  and  clerical  help  as  might 
be  necessary  for  a  proper  administration  of  the  funds. 

It  would  make  a  list  of  securities  in  which  the  Boards  of  Trustees 
would  invest  their  funds. 

It  would  pass  on  the  legality  of  each  claim  for  annuity  or  benefit 
and  would  determine  the  amount  of  annuity  or  benefit  to  be  paid. 

It  would  pass  on  all  claims  for  disability  or  death  benefits  resulting 
from  the  performance  of  duty. 

The  City  Treasurer  would  be  the  custodian  of  all  funds. 

ANNUITIES  AND  DISABILITY  BENEFITS 

The  Annuities  and  Disability  benefits  proposed  are  of  five  classes : 

1.  Age  and  Service  Annuities 

2.  Widows'  Annuities 

3.  Children's  Annuities 

4.  Disability  Benefits,  where  the  disability  is  not  incurred  in  the 
performance  of  duty 

5.  Disability  and  Death  Benefits,  where  the  disability  or  death  is 
incurred  in,  or  as  a  consequence  of  the  performance  of  duty. 

The  main  features  of  the  proposed  plan  follow. 

In  arrangement,  those  relating  to  Age  and  Service  Annuities  and 
to  Widows'  Annuities  are  classified  under  four  heads : 

1.  Age  and  Service  Annuities  for  future  entrants 

2.  Widows'  Annuities  for'  widows  of  future  entrants 

3.  Age  and  Service  Annuities  for  present  employes 

4.  Widows'  Annuities  for  widows  of  present  employes. 

Under  each  head,  the  topics  discussed  are  classified  under  the 
letters  of  the  alphabet,  similar  topics  being  discussed  under  the  same 
letter.  For  instance,  the  topic  "Deductions  from  Salaries"  is  discussed 
under  the  letter  "A"  under  each  head. 

The  provisions  relating  to  Age  and  Service  Annuities  and  to 
Widows'  Annuities,  as  classified  under  the  letters  of  the  alphabet, 
under  all  four  heads,  are  subject  to  the  following  modifications: 

The  amount  of  annuity  which  any  employe  or  the  widow  of  any 
employe  may  receive  would  not  exceed  75  per  cent  of  the  salary  of 
the  employe  during  his  last  year  of  service,  if  he  resigned  or  was 
dismissed  from  service  before  his  attainment  of  age.  65  (Police  and 

43 


MAIN   PROVISIONS   OF   PLAN 

Fire  57),  or  75  per  cent  of  his  salary  for  the  year  .preceding  the  date 
when  he  attained  age  65  (Police  and  Fire  57),  if  he  remains  in  service 
to  such  date. 

If  the  accumulation  to  the  credit  of  an  employe  from  deductions 
from  salary  for  Age  and  Service  Annuity,  or  for  Widow's  Annuity, 
on  the  date  when  he  enters  upon  annuity  or  attains  age  65,  whichever 
event  first  occurs,  is  more  than  sufficient  to  provide  an  annuity  of 
75  per  cent  of  salary,  as  stated  in  the  preceding  paragraph,  the  part 
of  the  excess  ,of  such  accumulation  over  that  necessary  to  provide 
such  annuity  arising  from  deductions  from  the  salary  of  the  employe 
will  be  refunded  to  him. 

If  a  wife  is  older  than  her  husband,  the  amount  of  a  Widow's 
Annuity  for  her  will  be  that  which  can  be  provided  on  the  assumption 
that  her  age  is  the  same  as  that  of  her  husband. 

AGE    AND    SERVICE    ANNUITIES 

(Future  Entrants  Only) 

A.  Deductions  from  Salaries 

Deduct  3  per  cent  from  each  payment  on  account  of  salary  of  each 
employe.  These  deductions  are  to  begin  when  the  employe  enters  the 
service  and  to  continue  until  he  or  she  attains  age  65  (Police  and 
Fire  57)  and  not  beyond  that  time. 

An  exception  occurs  if  the  employe  enters  the  service  after  age 
50  (Police  and  Fire  42).  In  any  such  case,  if  he  or  she  remains  in 
service  after  attainment  of  age  65  (Police  and  Fire  57),  deductions 
from  salary  will  continue  for  fifteen  years  from  the  date  of  his  or  her 
appointment,  and  not  beyond  that  time. 

B.  Contributions  of  Public 

With  every  contribution  of  an  employe,  the  public  is  to  contribute 
6  per  cent  of  -the  salary  of  the  employe  (Police  and  Fire  9  per  cent). 
These  contributions  will  not  necessarily  be  made  when  the  deductions 
from  salary  are  made,  but  will  involve  interest  at  the  rate  of  4  per 
cent  per  annum,  so  that  their  effect  will  be  the  same  as  if  they  were 
made  at  the  times  when  the  deductions  from  salary  are  made. 

Contributions  of  the  public  on  behalf  of  an  employe  will  cease 
when  deductions  from  the  salary  of  the  employe  ceases. 

C.  Allocation  of  Contributions 

Contributions  by  and  on  behalf  of  an  employe  for  Age  and  Service 
Annuity  will  be  allocated  to  the  employe  when  made.  As  long  as  the 
employe  remains  in  service,  they  will  be  improved  periodically  at 
interest  at  the  rate  of  4  per  cent  per  annum,  until  he  or  she  attains 
age  65  (Police  and  Fire  57),  or  to  the  end  of  the  fifteen-year  period 

44 


MAIN   PROVISIONS   OF   PLAN 

in  any  case  where  the  employe  entered  the  service  after  attainment 
of  age  50  (Police  and  Fire  42). 

Funds  thus  allocated  to  an  employe  for  Age  and  Service  Annuity 
cannot  be  used  to  pay  annuities  to  those  who  precede  the  employe 
on  annuity. 

D.  Age  When  Employe  May  Obtain  Maximum  Annuity 

When  an  employe  attains  age  65  (Police  and  Fire  57),  while  in 
service,  his  Age  and  Service  Annuity  rights  will  be  determined,  and 
such  annuity  will  not  be  increased  by  reason  of  service  beyond  that 
time. 

This  applies  to  all  employes  except  those  who  entered  the  service 
after  age  50  (Police  and  Fire  42).  In  these  cases,  the  annuity  rights 
would  be  determined  fifteen  years  after  the  dates  of  appointment. 

E.  Provisions   Regarding   Withdrawal   from   Service,   with   Less 

Than  Ten  Years  of  Service  and  before  Age  65  (Police  and 
Fire  57) 

First. — If  an  employe  resigns  or  is  dismissed  from  service  with 
a  period  of  service  of  less  than  ten  years  to  his  credit,  while  yet  under 
age  55  (Police  and  Fire  50),  he  will  be  entitled  to  refunds  of  deduc- 
tions from  his  salary  for  Age  and  Service  Annuity,  with  interest 
compounded  at  the  rate  of  4  per  cent  per  annum  to  the  date  of  his 
resignation  or  dismissal. 

If  he  so  elects,  however,  the  contributions  made  as  deductions 
from  salary  for  Age  and  Service  Annuity  may  be  left  in  the  fund, 
and,  if  they  are  left  in  the  fund,  they  will  bear  interest  at  the  rate 
of  3 1/2  per  cent  per  annum  from  the  date  when  he  resigned  or  was 
dismissed  from  service  to  the  date  when  he  attains  age  55  (Police 
and  Fire  50),  or  until  he  requests  refunds,  whichever  event  shall  first 
occur.  If  such  contributions  are  left  in  the  fund  to  accumulate  at 
interest,  the  public's  contributions  for  Age  and  Service  Annuity  from 
the  employe  will  also  remain  in  the  fund  to  the  employe's  credit,  so 
that  if  the  employe  should  return  to  the  service  of  the  city,  an  accu- 
mulation to  provide  for  the  years  of  service  theretofore  rendered 
would  be  awaiting  him. 

If  the  employe  does  not  return  to  service  before  attainment  of 
age  55  (Police  and  Fire  50),  then  upon  attainment  of  such  age,  interest 
earnings  on  his  accumulation  shall  cease. 

Second. — If  an  employe  resigns  or  is  dismissed  from  service  with 
a  period  of  service  of  less  than  ten  years  to  his  credit,  after  attainment 
of  age  55  (Police  and  Fire  50)  and  before  attainment  of  age  65 
(Police  and  Fire  57),  he  will  be  entitled  to  refunds  of  deductions  from 
salary  for  Age  and  Service  Annuity  with  interest  compounded  at  the 

45 


MAIN   PROVISIONS   OF   PLAN 

rate  of  4  per  cent  per  annum  to  the  date  of  his  resignation  or  dismissal. 
On  such  date  interest  earnings  on  his  accumulation  cease. 

When  refunds  are  made,  or  when  interest  earnings  on  an  employe's 
accumulation  cease,  as  explained  under  "First"  or  "Second"  in  this 
section  above,  the  employe  will  have  no  further  rights  to  contributions 
of  the  public  for  Age  and  Service  Annuity  for  the  employe  made 
during  the  period  when  such  deductions  from  salary  were  made. 

F.  Provisions  Regarding  Withdrawal  from  Service  after  at  Least 

Ten   Years   of   Service  and  before   Age   55    (Police   and 
Fire  50) 

If  an  employe  resigns  or  is  dismissed  from  service  after  a  period 
of  ten  years  from  the  date  of  his  appointment,  and  before  attainment 
of  age  55  (Police  and  Fire  50),  he  will  be  entitled  to  refunds  of 
deductions  from  his  salary  for  Age  and  Service  Annuity,  with  interest 
compounded  at  the  rate  of  4  per  cent  per  annum.  If  the  employe  so 
elects,  however,  the  contributions  made  as  deductions  from  salary  for 
Age  and  Service  Annuity  may  be  left  in  the  fund,  and-,  if  they  are 
left  in  the  fund,  they  will  bear  interest  at  the  rate  of  Zl/2  per  cent 
per  annum  from  the  date  when  the  employe  resigned  or  was  dismissed 
from  service  to  the  date  when  he  attains  age  55  (Police  and  Fire  50) 
and  will  be  used  to  provide  an  Age  and  Service  Annuity  for  the 
employe  beginning  at  age  55  (Police  and  Fire  50)  under  the  following 
provisions : 

a)  The  accumulation  from  the  contributions  of  the  employe  with 
interest  as  stated  will  be  used  to  provide  such  annuity. 

b)  One-tenth   of   the   accumulation   from   contributions   of   the 
public  for  Age  and  Service  Annuity  for  the  employe  on  the  date  of 
his  or  her  resignation  or  dismissal  from  service  for  each  full  year 
that  has  elapsed,  in  excess  of  ten  years,   from  the  date  when  the 
employe  entered  service,  to  the  date  of  his  or  her  resignation  ,or  dis- 
missal from  service,  but  not  to  an  amount  in  excess  of  the  total  accu- 
mulation, improved  at  interest  at  the  rate  of  3^2  per  cent  from  the 
date  of  resignation  or  dismissal  from  service  to  the  date  of  entrance 
upon  annuity.   , 

c)  The  table  of  mortality  and  rate  of  interest  to  be  used  in  these 
calculations  will  be  the  American  Experience  Table  of  Mortality  and 
3*/2  per  cent  interest. 

G.  Provisions    Regarding    Withdrawal    from    Service    after    at 

Least  Ten  Years  of  Service  and  after  Age  55  (Police  and 
Fire  50)  and  before  Age  65  (Police  and  Fire  57) 
If  an  employe  resigns  or  is  dismissed  from  service  after  a  period 
of  ten  years  from  the  date  of  his  appointment,  and  upon  or  after 

46 


MAIN   PROVISIONS   OF   PLAN 

attainment  of  age  55  (Police  and  Fire  50),  but  before  attainment  of 
age  65  (Police  and  Fire  57),  he  will  not  be  entitled  to  refunds  of 
deductions  from  his  salary.  Instead,  he  will  enter  upon  Age  and 
Service  Annuity  immediately.  The  amount  of  such  annuity  will  be 
that  which  can  be  provided  as  of  his  attained  age  on  the  date  when 
he  enters  upon  annuity,  in  accordance  with  the  provisions  stated  in  "F" 
above,  except  that  the  rate  of  interest  used  in  computing  the  annuity 
will  be  4  per  cent  instead  of  3^2  per  cent. 

H.  Provisions  Regarding  Withdrawal  from  Service  on  or  after 
Age  65  (Police  and  Fire  57)  If  Employe  Entered  Service 
before  Age  50  (Police  and  Fire  42) 

If  an  employe  resigns  or  is  dismissed  from  service  on  or  after 
attainment  of  age  65  (Police  and  Fire  57),  having  entered  the  service 
before  attainment  of  age  50  (Police  and  Fire  42),  he  will  not  be 
entitled  to  refunds  of  deductions  from  his  salary  for  Age  and  Service 
Annuity.  Instead,  he  will  enter  upon  annuity  immediately.  The  amount 
of  such  annuity  will  be  that  which  can  be  provided  from  the  accumu- 
lation to  his  credit  for  Age  and  Service  Annuity  on  the  date  when  he 
attained  age  65  (Police  and  Fire  57),  from  contributions  of  both  the 
public  and  himself,  determined  as  if  the  age  of  the  employe  were  65 
(Police  and  Fire  57).  The  rate  of  interest  used  in  this  calculation 
is  4  per  cent. 

I.  Provisions  Regarding  Withdrawal  from  Service  on  or  after 
Age  65  (Police  and  Fire  57)  If  Employe  Entered  Service 
after  Age  50  (Police  and  Fire  42)  + 

If  an  employe  resigns  or  is  dismissed  from  service  on  or  after 
attainment  of  age  65  (Police  and  Fire  57),  having  entered  the  service 
after  attainment  of  age  50  (Police  and  Fire  42),  he  will  not  be 
entitled  to  refunds  of  deductions  from  hi£  salary  for  Age  and  Service 
Annuity.  Instead,  he  will  enter  upon  annuity  immediately.  The  accu- 
mulation to  provide  such  annuity  will  be  that  to  his  credit  for  Age 
and  Service  Annuity,  from  contributions  of  both  the  public  and  him- 
self, on  the  date  when  he  enters  upon  annuity,  except  that  if  a  period 
of  more  than  fifteen  years  has  elapsed  since  he  entered  service  his 
accumulation  will  be  that  at  the  end  of  the  fifteen-year  period.  The 
annuity  will  be  of  the  amount  that  can  be  provided  from  such  accu- 
mulation, when  the  age  of  the  employe  is  taken  as  age  65  (Police 
and  Fire  57). 

WIDOWS'   ANNUITIES 

(Future  Entrants) 
A.     Deductions  From  Salaries 

Deduct  1  per  cent  from  each  payment  on  account  of  salary  of 

47 


MAIN    PROVISIONS    OF   PLAN 

each  man  employe  for  an  annuity  for  a  possible  widow  of  such 
employe.  These  deductions  are  to  be  made  when  deductions  are 
made  for  Age  and  Service  Annuity  for  the  employe,  whether  the 
employe  is  married  or  unmarried  when  such  deduction  is  made. 

An  exception  to  the  foregoing  occurs  in  the  case  where  an  employe 
enters  the  service  after  age  50  (Police  and  Fire  42),  and  remains  in 
service  after  age  65  (Police  and  Fire  57).  In  such  a  case  the  employe 
contributes  to  age  65  (Police  and  Fire  57),  and,  if  he  has  no  wife  upon 
attainment  of  such  age,  deductions  from  salary  for  a  Widow's  Annuity 
then  cease.  If  he  has  a  wife,  however,  upon  attainment  of  such  age, 
deductions  for  a  Widow's  Annuity  continue,  while  he  remains  in 
service,  to  the  end  of  the  fifteen-year  period  or  until  the  death  of  his 
wife,  whichever  event  first  occurs. 

B.  Contributions  of  Public 

With  every  contribution  of  an  employe  for  a  Widow's  Annuity, 
the  public  is  to  contribute  2  per  cent  of  the  salary  of  the  employe 
(Police  and  Fire  2*/2  per  cent)  for  the  same  purpose.  These  contri- 
butions bear  interest  at  the  rate  of  4  per  cent  per  annum,  so  that  the 
effect  is  the  same  as  if  the  contributions  were  made  when  deductions 
from  salary  were  made. 

C.  Allocation  of  Contributions 

The  contributions  by  and  on  behalf  of  an  employe  for  a  possible 
widow  of  the  employe  would  be  allocated  to  the  employe  when  made, 
and  while  he  remains  in  service  would  be  held  to  his  credit  with 
interest  at  the  rate  of  4  per  cent  per  annum,  to  provide  an  annuity 
for  a  possible  widow  under  the  conditions  to  be  stated  later. 

D.  Age  of  Employe  When  Widow  May  Obtain  Maximum  Annuity 

When  an  employe  attains  age  65  while  in  service  (Police  and 
Fire  57),  if  he  has  a  wife,  the  annuity  rights  of  such  wife  will  then 
be  determined,  and  her  annuity  will  not  be  increased  by  reason  of 
service  of  the  employe  after  his  attainment  of  such  age. 

An  exception  to  this*  would  occur  in  the  case  of  an  employe  who 
enters  the  service  after  age  50  (Police  and  Fire  42),  and  remains  in 
service  after  age  65  (Police  and  Fire  57).  In  such  a  case  the  annuity 
rights  of  the  wife  would  be  determined  fifteen  years  from  the  date 
of  the  employe's  entrance  into  service. 

If  an  employe  has  no  wife  when  he  attains  age  65  (Police  and 
Fire  57)  while  in  service,  the  deductions  from  his  salary  for  a  Widow's 
Annuity  will  be  returned  to  him  with  4  per  cent  compound  interest. 
After  that  no  one  will  be  eligible  for  a  Widow's  Annuity  because  of 
this  employe's  service. 

48 


MAIN   PROVISIONS   OF   PLAN 

The  preceding  paragraph  applies  to  those  who  enter  the  service 
after  age  50  (Police  and  Fire  42)  as  well  as  to  all  other  employes. 
In  any  case,  however,  where  the  employe  enters  the  service  after  age 
50  (Police  and  Fire  57),  and  his  wife  dies  while  the  employe  is  in 
service  and  before  a  period  of  fifteen  years  has  elapsed  from  the.  date 
of  his  appointment,  the  accumulation  on  date  of  death  of  wife  from 
deductions  from  salary  of  the  employe  for  a  Widow's  Annuity  will 
be  returned  to  the  employe.  After  that  no  one,  will  be  eligible  for  a 
Widow's  Annuity  because  of  this  employe's  service. 

E.  Provisions    Regarding   a   Widow's   Annuity   if   the    Employe 

Withdraws  from  Service  with  Less  Than  Ten  Years  of 
Service  and  before  Age  65  (Police  and  Fire  57) 

If  an  employe  resigns  or  is  dismissed  from  service  with  a  period 
of  service  of  less  than  ten  years  to  his  credit,  while  yet  under  age  65 
(Police  and  Fire  57),  he  will  be  entitled  to  refunds  of  deductions  from 
his  salary  for  a  Widow's  Annuity  with  interest  at  the  rate  of  4  per  cent 
per  annum  to  the  date  of  his  resignation  or  dismissal. 

If  he  is  still  under  age  55  (Police  and  Fire  50),  however,  and 
elects  to  leave  his  deductions  from  salary  for  Age  and  Service  Annuity 
to  remain  in  the  fund,  his  deductions  from  salary  to  provide  a  Widow's 
Annuity  will  also  remain  in  the  fund  to  be  refunded  or  used  for  annuity 
purposes  according  to  the  provisions  governing  refunds  or  use  of  his 
deductions  from  salary  for  Age  and  Service  Annuity,  as  stated  under 
"E,"  above. 

F.  Provisions    Regarding   a   Widow's    Annuity   if   the    Employe 

Withdraws   from    Service   after  at   Least   Ten   Years   of 
Service  and  before  Age  55 

If  an  employe  resigns  or  is  dismissed  from  service  after  completion 
of  at  least  ten  full  years  of  service  and  before  attainment  of  age  55 
(Police  and  Fire  50),  and  has  a  wife  at  the  time  of  his  resignation 
or  dismissal  from  service,  he  is  entitled  to  refunds  of  deductions  from 
his  salary  for  a  Widow's  Annuity,  with  interest  compounded  at  the 
rate  of  4  per  cent  per  annum.  If,  however,  he  allows  the  accumula- 
tion from  deductions  from  his  salary  to  provide  an  Age  and  Service 
Annuity  for  himself  to  remain  to  his  credit  in  the  fund,  the  accumu- 
lation to  his  credit  for  an  annuity  for  a  possible  widow  also  remains 
in  the  fund  at  interest  at  the  rate  of  3^2  per  cent  per  annum,  until 
the  employe  attains  age  55  (Police  and  Fire  50).  When  this  age  is 
attained,  the  annuity  rights  of  such  wife  will  be  determined  as  of 
her  attained  age  at  such  time,  under  the  following  provisions,  except 
that  the  amount  of  annuity  will  not  exceed  75  per  cent  of  salary  as 
stated  under  "J"  below. 

49 


MAIN    PROVISIONS    OF   PLAN 

a)  The  accumulation  from  contributions  of  the  employe  to  pro- 
vide an  annuity  for  a  possible  widow,  with  interest  as  stated,  are  used 
to  provide  such  annuity. 

b)  One- tenth  of   the  accumulation   from  contributions   of   the 
public  for  a  Widow's  Annuity  on  the  date  of  his  resignation  or  dis- 
missal from  service,  for  each  full  year  that  has  elapsed  in  excess  of 
ten  years  from  the  date  when  the  employe  enters  the  service  to  the 
date  of  his  resignation  or  dismissal  from  service,  but  not  to  an  amount 
in  excess  of  the  total  accumulation,  improved  at  interest  at  the  rate 
of  3^2  per  cent  per  annum,  from  the  date  of  resignation  or  dismissal 
from  service  to  the  date  of  entrance  upon  annuity. 

c}  The  table  of  mortality  and  the  rate  of  interest  to  be  used  in 
these  calculations  will  be  the  American  Experience  Table  of  Mortality 
and  3^2  per  cent  interest. 

• 

G.  Provisions  Regarding  a  Widow's  Annuity  if  the  Employe 
Withdraws  from  Service  after  Age  55  after  at  Least  Ten 
Years  of  Service  (Police  and  Fire  50),  but  before  Age  65 
(Police  and  Fire  57) 

If  an  employe  resigns  or  is  dismissed  from  service  after  a  period 
of  ten  years  from  the  date  of  his  appointment  and  upon  or  after  attain- 
ment of  age  55  (Police  and  Fire  50),  but  before  attainment  of  age  65 
(Police  and  Fire  57),  and  has  a  wife  at  the  time  of  his  resignation 
or  dismissal,  his  wife  will  be  eligible  for  a  Widow's  Annuity  as  deter- 
mined at  the  time  her  husband  enters  on  annuity,  according  to  the 
provisions  stated  in  "F"  above,  except  that  the  rate  of  interest  used 
in  computing  the  annuity  will  be  4  per  cent  instead  of  Zy2  per  cent. 

H.  Provisions  Regarding  a  Widow's  Annuity  if  the  Employe 
Withdraws  from  Service  on  or  after  Age  65  (Police  and 
Fire  57),  Having  Entered  the  Service  before  Age  50 
(Police  and  Fire  42) 

When  an  employe  is  in  service  upon  attainment  of  age  65  (Police 
and  Fire  57),  having  entered  the  service  before  attainment  of  age  50 
(Police  and  Fire  42),  if  he  has  a  wife,  he  will  not  be  entitled  to  refunds 
of  deductions  from  salary  for  a  Widow's  Annuity.  Instead,  the  annuity 
rights  of  such  wife  will  be  determined  immediately. 

The  amount  of  annuity  she  will  receive  will  be  that  which  can  be 
provided  from  the  entire  accumulation  to  the  credit  of  her  husband 
from  contributions  of  both  the  public  and  himself  to  provide  a  Widow's 
Annuity,  on  the  date  when  her  husband  attains  age  65  (Police  and 
Fire  57),  determined  according  to  her  attained  age  on  such  date. 

50 


MAIN   PROVISIONS   OF   PLAN 

I.  Provisions  Regarding  a  Widow's  Annuity  if  the  Employe 
Withdraws  from  Service  after  Age  65  (Police  and  Fire 
57)  Having  Entered  the  Service  after  Age  50  (Police  and 
Fire  42) 

These  provisions  are  classified  under  two  heads,  as  follows : 

First. — If  the  employe  resigns  or  is  dismissed  from  service  inside 
of  a  period  of  fifteen  years  from  the  date  of  his  entrance  into  service. 

Second.— If  the  employe  resigns  or  is  dismissed  from  service  on 
or  after  a  period  of  fifteen  years  from  the  date  of  his  entrance  into 
service. 

First. — If  an  employe  resigns  or  is  dismissed  from  service  after 
attainment  of  age  65  (Police  and  Fire  57),  and  inside  of  a  period  of 
fifteen  years  from  the  date  of  his  entrance  into  service,  if  he  has  a 
wife  to  whom  he  was  married  upon  his  attainment  of  age  65,  he  will 
not  be  entitled  to  refunds  of  deductions  from  salary  for  a  Widow's 
Annuity.  Instead,  the  annuity  rights  of  such  wife  will  be  determined 
immediately.  The  amount  of  the  annuity  which  she  will  receive  will 
be  that  which  can  be  provided  from  the  entire  accumulation  to  the 
credit  of  her  husband  on  the  date  when  he  resigned  or  was  dismissed 
from  service,  from  contributions  of  both  the  public  and  himself,  to 
provide  a  Widow's  Annuity,  computed  according  to  her  attained  age 
when  her  husband  was  of  age  65  (Police  and  Fire  57). 

Second. — If  an  employe  resigns  or  is  dismissed  from  service  after 
attainment  of  age  65  (Police  and  Fire  57),  on  or  after  a  period  of 
fifteen  years  from  the  date  of  his  entrance  into  service,  having  entered 
the  service  after 'attainment  of  age  50  (Police 'and  Fire  42),  if  he  shall 
have  a  wife  at  the  expiration  of  the  fifteen-year  period  to  whom  he 
was  married  upon  his  attainment  of  age  65  (Police  and  Fire  57), 
he  shall  not  be  entitled  to  refunds  of  deductions  from  salary  for  a 
Widow's  Annuity.  In  this  case  the  annuity  rights  of  the  wife  will 
be  determined  at  the  end  of  the  fifteen-year  period.  The  amount  of 
the  annuity  which  she  will  receive  will  be  that  which  can  be  provided 
from  the  accumulation  to  the  credit  of  her  husband  at  the  end  of  the 
fifteen-year  period  from  contributions  of  both  the  public  and  himself 
to  provide  a  Widow's  Annuity,  computed  according  to  her  age  when 
her  husband  was  of  age  65  (Police  and  Fire.  57). 

J.  Provisions  Regarding  a  Widow's  Annuity  if  the  Employe 
Dies  before  Age  65  (Police  and  Fire  57) 

If  an  employe  dies  while  in  service  before  attainment  of  age  65 
(Police  and  Fire  57),  leaving  a  wife,  the  accumulation  to  the  credit 
of  the  employe  at  the  time  of  his  death,  to  provide  both  an  Age  and 
Service  Annuity  and  a  Widow's  Annuity,  will  be  used  to  provide  an 

51 


MAIN   PROVISIONS   OF   PLAN 

annuity  for  the  widow  of  such  employe  at  her  age  on  the  date  of 
her  husband's  death,  except  that  the  contributions  of  the  public  will 
not  be  used  for  such  purpose  to  such  an  extent  as  would  provide, 
when  combined  with  the  accumulation  from  deductions  from  salary 
of  the  employe,  an  annuity  for  such  widow  in  excess  of  that  which 
she  would  have  received  if  her  husband  had  lived  to  age  65  (Police 
and  Fire  57),  and  during  such  period  received  the  salary  he  received 
at  the  time  of  his  death. 

If  an  employe  who  withdrew  from  service  after  at  least  ten  years 
of  service  and  before  attainment  of  age  55  (Police  and  Fire  50), 
does  not  receive  refunds  of  the  accumulation  from  deductions  from 
salary,  then  if  the  employe  dies  before  attaining  age  55  (Police  and 
Fire  50)  leaving  a  wife  to  whom  he  was  married  before  he  withdrew 
from  service,  the  accumulation  to  the  credit  of  the  employe  at  the 
time  of  his  death  to  provide  both  an  Age  and  Service  Annuity  and 
a  Widow's  Annuity  will  be  used  to  provide  an  annuity  for  such  wife 
at  her  age  on  the  date  of  her  husband's  death,  except  that  the  contribu- 
tions ,of  the  public  will  not  be  used  for  such  purpose  to  such  an 
extent  as  would  provide,  when  combined  with  the  accumulation  from 
deductions  from  salary  of  the  employe,  an  annuity  to  such  widow  in 
excess  of  that  which  she  would  have  received  if  her  husband  had  lived 
to  age  55  (Police  and  Fire  50)  and  had  entered  upon  annuity. 

K.  Provisions  Regarding  a  Widow's  Annuity  if  the  Employe 
Enters  the  Service  after  Age  50  (Police  and  Fire  42)  and 
Dies  While  in  Service  after  Attainment  of  Age  65  (Police 
and  Fire  57)  but  before  the  End  of  His  Fifteenth  Year  of 
Service 

If  an  employe  enters  the  service  after  attainment  of  age  50  (Police 
and  Fire  42)  and  dies  while  in  service  after  attainment  of  age  65 
(Police  and  Fire  57)  but  before  the  end  of  his  fifteenth  year  of 
service,  leaving  a  widow,  then,  if  they  were  married  before  his  attain- 
ment of  age  65,  such  widow  will  be  entitled  to  a  Widow's  Annuity. 
The  amount  of  such  annuity  will  be  that  which  can  be  provided  from 
the  accumulation  to  the  credit  of  the  employe  at  the  time  of  his  death 
from  contributions  of  both  the  public  and  the  employe  for  Age  and 
Service  Annuity,  and  Widow's  Annuity,  according  to  her  attained  age 
on  the  date  when  her  husband  attained  age  65  (Police  and  Fire  57), 
except  that  the  contributions  of  the  public  will  not  be  used  to  such  - 
an  extent  that  the  widow  would  receive  a  greater  annuity  than  she 
would  have  received  if  her  husband  lived  to  the  end  of  the  fifteen- 
year  period,  and  during  such  period  received  the  salary  he  received 
at  the  time  of  his  death. 

52 


MAIN   PROVISIONS   OF   PLAN 

L.     Provisions  Regarding  a  Widow's  Annuity  if  the  Employe  Dies 

While  in  or  as  a  Consequence  of  Performance  of  Duty 
If  an  employe  dies  while  in  or  as  a  consequence  of  the  perform- 
ance of  duty,  the  widow  of  such  employe  if  she  does  not  remarry 
will  receive  in  annuity  the  annuity  which  she  would  have  received 
if  her  husband  had  lived  to  age  65  (Police  and  Fire  57),  and  had 
received  during  the  period  the  salary  he  received  at  the  time  of  death 
or  disability.  If  she  remarries,  her  annuity  after  remarriage  will  be 
that  of  the  widow  of  an  employe  who  dies  while  in  service  but  not 
in  or  as  a  consequence  of  the  performance  of  duty. 

FURTHER   REFUND   PRIVILEGES 

1.  If  a  man  employe  dies  while  in  service  before  attainment  of 
age  65  (Police  and  Fire  57),  leaving  no  widow,  the  amount  of  accu- 
mulation to  the  credit  of  such  employe  on  the  date  of  his  death,  from 
deductions  from  salary  for  Age  and  Service  Annuity,  and  also  for  a 
Widow's  Annuity,  will  be  refunded. 

2.  If  a  man  employe  resigns  or  is  dismissed  from  service  after 
a  period  of  at  least  ten  years  of  service  and  before  attainment  of  age 
55  (Police  and  Fire  50),  and  has  no  wife  on  the  date  of  his  resigna- 
nation  or  dismissal  from  service,  then  the  accumulation  to  his  credit 
on  the  date  of  his  resignation  or  dismissal  from  service  from  deductions 
from  salary  for  a  Widow's  Annuity  will  be  refunded.     If  any  such 
employe  has  a  wife  on  the  date  of  his  resignation  or  dismissal  from 
service,  and  such  wife  dies  before  he  enters  upon  Age  and  Service 
Annuity,  the  accumulation  to  his  credit  on  the  date  of  such  wife's 
death,  from  deductions  from  salary  for  a  Widow's  Annuity,  will  be 
refunded.    If  thereafter  any  such  employe  should  die  before  entering 
upon  Age  and  Service  Annuity,  the  accumulation  to  his  credit  on  the 
date  of  his  death  from  deductions  from  salary  to  provide  an  Age  and 
Service  Annuity  will  be  refunded. 

3.  If  a  man  employe  attains  age  65  (Police  and  Fire  57)  while 
in  service,  and  has  no  wife  upon  attainment  of  such  age,  the  accumu- 
lation to  his  credit  on  the  date  when  he  attains  such  age,  from  deduc- 
tions from  salary  to  provide  a  Widow's  Annuity,  will  be  refunded. 
If  the  employe  should  afterward  die  while  in  service,  the  accumulation 
to  his  credit   from  deductions  from  salary  to  provide  an  Age  and 
Service  Annuity  will  be  refunded. 

4.  If  a  woman  employe  dies  while  in  service,  the  accumulation 
to  her  credit  on  the  date  of  her  death,  from  deductions  from  salary 
to  provide  an  Age  and  Service  Annuity,  will  be  refunded. 

5.  If  a  retired  employe  dies  before  an  amount  equal  to  the  accu- 
mulation to  his  credit  on  the  date  when  he  entered  upon  annuity, 

53 


-  MAIN   PROVISIONS   OF   PLAN 

from  deductions  from  salary  to  provide  an  Age  and  Service  Annuity 
and  a  Widow's  Annuity,  if  any,  less  any  amount  paid  in  refunds  to 
him,  has  -been  paid  in  annuity  to  him  and  his  widow,  if  any,  the 
balance  of  such  accumulation  with  the  total  of  the  amounts  thus  paid 
in  annuity  will  be  refunded. 

Refunds  will  be  made  as  directed  by  the  employe,  former  employe, 
or  retired  employe  in  writing.  If  no  directions  were  given,  such 
refunds  will  be  made  to  the  children  of  the  blood  in  equal  amounts 
to  each,  if  such  exist;  or,  if  none  such  exist,  then  to  the  employe's 
parents  in  equal  amounts  to  each,  if  such  exist;  or,  if  none  such  exist, 
then  to  the  heirs,  administrators,  or  assigns  of  the  employe,  former 
employe,  or  retired  employe. 

ANNUITIES  FOR  CHILDREN  OF  FUTURE  ENTRANTS 

(Applicable  to  Men  and  Women) 

Children  Eligible  for  Annuity 

It  is  proposed  that  children  eligible  for  annuity  shall  be  all  chil- 
dren of  the  blood  under  18  years  of  age  of  deceased  employes,  and 
of  retired  employes  who  died  after  entering  upon  annuity,  except  the 
following : 

1.  Any  child  whose  employe  parent  was  in  service  formless  than 
four  years,  unless  the  death  of  such  parent  was  the  result  <of  the 
performance  of  duty. 

2.  Any  child  whose  employe  parent  enters  the  service  after  attain- 
ment of  age  55  (Police  and  Fire  50),  unless  such  child  is  the  issue 
of  a  marriage  contracted  before  such  parent  entered  the  service,  and 
the  employe  was  in  service  for  not  less  than  four  years,  or  unless 
death  of  the  parent  was  the  result  of  the  performance  of  duty. 

3.  Any  child  born  after  its  employe  parent  attains  the  age  of  65 
years  (Police  and  Fire  57). 

4.  Any    child   born   after   its    employe   parent   has    retired   on 
Age  and  Service  Annuity. 

5.  Any  child  whose  employe  parent  resigns  or  is  dismissed  from 
service  before  attainment  of  age  55  (Police  and  Fire  50). 

Amount  of  Annuity 

It  is  proposed  that  the  amount  of  annuity  will  be  $10.00  per  month 
while  the  wife  (or  husband)  of  the  employe  is  alive;  or  $15.00  per 
month  for  each  child  if  the  wife  (or  husband)  of  the  employe  is 
not  alive. 

This  annuity  would  be  payable  until  the  child  attains  his  or  her 
eighteenth  birthday. 

54 


MAIN   PROVISIONS   OF   PLAN 

Limitation  on  Amounts  to  Be  Paid  in  Annuity  to  Children 

The  payments  to  children  are  subject  to  the  provision  that  the 
combined  annuity  of  a  widow  and  the  employe's  children  do  not  exceed 
50  per  cent  of  the  salary  of  the  employe  as  it  was  at  the  time  of  the 
employe's  death,  if  the  employe  dies  while  in  service,  or  as  it  was  during 
the  last  year  of  service  of  the  employe,  if  the  employe  died  while  on 
annuity. 

It  is  proposd  that  children's  annuities  will  be  paid  for  wholly  by 
the  employer. 

DISABILITY  BENEFITS  WHEN  DISABILITY  IS  NOT  IN- 
CURRED  IN    PERFORMANCE   OF    DUTY 

Employes  Eligible  for  Benefits 

All  employes  while  under  the  age  of  65  (Police  and  Fire  57), 
and  all  employes  over  such  age  who  have  not  completed  15  years  of 
service,  shall  be  eligible  for  such  benefits. 

Amount  of  Benefits 

Fifty  per  cent  of  salary,  but  from  this  will  be  deducted  the  amounts 
required  from  the  employe  to  maintain  contributions  for  Age  and 
Service  Annuity,  and,  in  cases  of  men,  for  Widow's  Annuity.  Thus 
the  actual  amount  received  would  be :  Men,  46  per  cent  of  salary. 
Women,  47  per  cent  of  salary. 

When  Disability  Benefits  Shall  Begin 

Disability  benefits  shall  begin  at  the  expiration  of  the  time  allowed 
under  laws,  ordinances  or  administrative  rules  for  sick  leave  with 
pay,  but  not  before  a  period  of  15  days  has  elapsed  from  the  date 
when  the  sickness  began  or  the  injury  was  incurred. 

Duration  of  Benefits 

Benefits  shall  continue  during  the  period  of  disability  not  to 
exceed  one-quarter  of  the  period  of  service  of  the  employe,  nor  more 
than  5  years,  and  not  to  extend  beyond  the  date  when  the  employe 
attains  age  65  (Police  and  Fire  57),  if  he  has  had  at  least  15  years 
of  service  to  .his  credit,  and  not  beyond  the  15  years  of  service 
period,  -if  he  attains  such  age  with  less  than  15  years  of  service 
to  his  credit. 

Amounts  Paid  by  City  and  Employes 

During  the  year  1922,  the  city  will  pay  one-half  of  one  per 
cent  of  the  salaries  of  the  employes  involved,  and  also  keep  up  the 
contributions  being  made  for  the  employe  by  the  city,  at  the  time  of 
his  disability,  for  Age  and  Service  Annuity  and  Widow's  Annuity. 
During  said  year  the  employes  will  pay  one- half  of  one  per  cent  of 

55 


MAIN   PROVISIONS   OF   PLAN 

salary  for  such  benefits.  Thereafter,  the  city  will  pay  one-half  of  the 
cost  of  these  benefits  and  keep  up  the  contributions  for  Age  and  Service 
Annuity  and  Widow's  Annuity  as  aforesaid,  and  the  employes  will 
pay  one-half  of  such  cost. 

Method  of  Contribution  by  City  and  Employes 

The  Commission  will  estimate  each  year  the  cost  of  such  benefits 
for  the  year,  this  estimate  being  based  on  the  experience  of  the  fund 
for  the  previous  year.  The  city  will  pay  its  share  of  this  estimate  at 
intervals  to  be  decided  upon.  The  employes  will  pay  their  share  in 
equal  monthly  instalments,  pro-rated  on  the  basis  of  salaries. 

When  Contributions  Cease 

Contributions  by  both  public  and  employe  cease  when  the  employe 
attains  age  65  (Police  and  Fire  57),  or  at  the  end  of  the  15  years  of 
service  period. 

DISABILITY  AND  DEATH  BENEFITS  WHEN  DISABILITY 
OR  DEATH  IS  INCURRED  IN  OR  AS  A  RESULT  OF 
THE  PERFORMANCE  OF  DUTY. 

Employes  Eligible  for  Benefits 

All  employes  while  under  the  age  of  65  (Police  and  Fire  57), 
and  all  employes  over  such  age  who  have  not  completed  15  years  of 
service,  shall  be  eligible  for  such  benefits. 

Amount  of  Disability  Benefits 
Fifty-five  per  cent  of,  salary. 

When  Disability  Benefits  Shall  Begin 

Disability  benefits  shall  begin  at  the  expiration  of  the  time  allowed 
under  laws,  ordinances  or  administrative  rules  for  sick  leave  with  pay. 

Duration  of  Disability  Benefits 

Benefits  shall  continue  during  the  period  of  disability  until  the 
employe  attains  age  65  (Police  and  Fire  57)  if  he  has  at  least  15 
years  of  service  to  his  credit,  or  until  the  end  of  the  15-year  period 
of  service,  if  he  attains  such  age  with  less  than  15  years  of  service 
to  his  credit. 

Death  Benefits 

li  an  employe  is  killed  while  in  performance  of  duty  or  receives 
injuries  while  in  performance  of  duty  from  which  he  afterward  dies, 
his  widow,  if  she  does  not  remarry,  will  receive  an  annuity  of  that 
which  would  be  provided  for  her  if  her  husband  had  lived  to  age  57 
in  the  case  of  a  policeman  or  a  fireman,  or  age  65  in  the  case  of  any 
other  employe,  or  to  the  end  of  the  15-year  period  of  service,  and 

56 


i 
MAIN   PROVISIONS   OF   PLAN 

had  in  the  meantime  the  salary  he  had  at  the  time  when  death  or 
disability  occurred. 

Amounts  Paid  By  Employes 

Employes  make  no  contributions  for  such  benefits. 

Benefits  Modified  by  Amounts  Received  Under  Workmen's  Com- 
pensation Act 

If  an  employe  or  the  members  of  his  family  shall  receive  any 
compensation  under  the  Workmen's  Compensation  Act,  then  the  ben- 
efits stated  above  shall  be  reduced  by  the  amount  pr  amounts  of  such 
compensation,  if  they  be  less  than  such  benefits,  and  if  the  amount  or 
amounts  of  such  compensation  exceed  such  benefits,  then  the  benefits 
shall  not  be  payable  to  the  recipient  or  recipients  of  such  compensation 
until  the  expiration  of  the  period  of  time  during  which  the  sum  or  sums 
payable  in  benefits  would  equal  the  sum  or  sums  received  in 
compensation. 

MODIFICATIONS  OF  PROVISIONS  WHEN  APPLIED 
TO  PRESENT  EMPLOYES 

The  plan  recommended  for  present  employes  is  the  same  as  that 
outlined  for  future  entrants,  modified  so  that  a  present  employe  may 
receive  credit  for  service  rendered  before  the  plan  takes  effect  and, 
also,  so  that  a  present  employe  would,  under  certain  conditions,  receive 
the  same  annuity  as  a  future  entrant  would  receive. 

For  definiteness  of  expression,  it  is  assumed  that  the  plan,  if  put 
into  effect,  will  become  operative  on  Jan.  1,  1922.  Whenever  such 
date  appears,  it  is  to  be  understood  that  what  is  meant  is  the  date 
when  the  plan  will  become  operative. 

PROVISIONS  FOR  AGE  AND  SERVICE  ANNUITIES  AND 
FOR    WIDOWS'    ANNUITIES 

(Present  Employes) 

AGE  AND  SERVICE  ANNUITIES 

A.     Credit  to,  and  Contributions  of  Present  Employes 

1.  The  employe  will  receive  credit  for  Age  and  Service  Annuity 
for  himself  for  all  amounts  which  he  has  paid  into  any  existing  pension 
fund,  with  4  per  cent  interest  from  the  date  when  any  such  contribution 
was  made  to  Jan.  1,  1922.  The  accumulation  from  such  contributions 
would  henceforth  bear  interest  and  be  used  for  annuity  purposes  in 
exactly  the  same  manner  as  if  the  contributions  were  made  under  the 
provisions  of  the  present  plan,  except  that  the  right  to  refund  of  such 

57 


MAIN   PROVISIONS   OF   PLAN      - 

contributions  would  be  governed  by  the  provisions  of  the  Act  under 
which  the  contributions  were  made. 

2.  The  employe  contributes  3  per  cent  of  salary  for  Age  and 
Service  Annuity.  These  contributions  begin  on  Jan.  1,  1922,  and 
continue,  if  the  employe  remains  in  service,  until  he  has  paid  into  the 
fund,  with  interest,  an  amount  which,  taken  with  the  accumulation 
stated  in  the  preceding  paragraph,  is  equal  to  the  amount  which  a 
future  entrant  of  like  age  at  entrance,  like  salary,  and  like  period 
of  service,  would  pay  into  the  fund. 

B.  Contributions  of  Public 

The  public  pays  into  the  fund  on  behalf  of  each  present  employe 
for  Age  and  Service  Annuity  for  the  employe,  6  per  cent  of  the 
salary  of  the  employe  as  it  will  be  on  Jan.  1,  1922  (Police  and  Fire  9 
per  cent),  for  each  year  of  service  which  the  employe  rendered  before 
Jan.  1,  1922,  with  interest  at  4  per  cent  per  annum. 

The  public  will  also  pay  into  the  fund  after  Jan.  1,  1922,  for  Age 
and  Service  Annuity,  6  per  cent  of  the  salary  of  the  employe  (Police 
and  Fire  9  per  cent)  until  the  employe  attains  age  65  (Police  and 
Fire  57),  or,  in  the  cases  of  employes  who  entered  the  service  after 
age  50  (Police  and  Fire  42),  to  the  end  of  the  fifteen-year  period. 
This  is  of  course  conditioned  upon  the  employe's  remaining  in  service. 

The  above  provisions  are  subject  to  modification  to  fit  employes 
over  age  65  (Police  and  Fire  57)  on  Jan.  1,  1922.  In  any  such  case, 
it  is  proposed  that  the  public  contribute  the  percentage  of  salary  stated 
for  each  year  of  service  up  to  Jan.  1,  1922,  and  then  cease  contributing 
,on  behalf  of  such  employe. 

C.  Allocation  of  Contributions 

Contributions  by  and  on  behalf  of  a  present  employe  because  of 
service  rendered  after  Jan.  1,  1922,  would  be  allocated  to  the  employe 
when  made  and  held  as  a  credit  to  him  or  her,  exactly  as  in  the  case 
of  a  future  entrant. 

Contributions  on  behalf  of  a  present  employe  because  of  service 
rendered  before  Jan.  1,  1922,  will  not  be  allocated  to  the  employe, 
but  will  be  placed  in  a  general  fund  and  from  that  fund  that  part 
of  the  annuity  provided  because  of  service  rendered  before  Jan.  1, 
1922,  would  be  paid. 

D.  When  Amount  of  Annuity  Is  Determined 

In  the  cases  of  present  employes,  the  annuity  rights  of  the  employe 
would  not  be  determined  at  age  65  (Police  and  Fire  57),  or  after  a 
period  of  fifteen  years  where  the  employe  entered  after  age  50  (Police 

58 


MAIN   PROVISIONS   OF   PLAN 

and  Fire  42),  as  was  stated  in  the  cases  of  future  entrants,  unless  such 
present  employe  retired  from  service  at  such  time. 

If  a  present  employe  remains  in  service  beyond  age  65  (Police 
and  Fire  57),  or  beyond  the  fifteen-year  period,  deductions  from  salary 
will  continue  and  the  accumulation  to  his  credit  will  continue  to  earn 
interest  until  there  is  sufficient  accumulation  to  his  credit  to  provide 
him  an  annuity  at  his  attained  age  equal  to  that  which  a  future  entrant 
would  receive  whose  age  at  entrance,  period  of  service,  and  salary  were 
the  same  as  his.  His  annuity  rights  would  then  be  determined.  If 
he  remains  in  service  beyond  this  date,  however,  he  will  continue  to 
pay  into  the  fund  at  his  former  rate  of  payment,  until  he  had  paid 
the  same  amount  into  the  fund,  with  interest,  which  a  future  entrant 
of  like  age  at  entrance,  like  period  of  service,  and  like  salary  \yill 
have  paid. 

E,  F,  G.     Provisions  Regarding  Withdrawals  from  Service 

Provisions  under  "E,"  "F,"  and  "G"  under  Age  and  Service 
Annuities  for  future  entrants  would  remain  the  same  for  present 
employes.  In  such  cases,  the  accumulation  to  the  credit  of  the  employe 
would  include  the  accumulation  to  his  credit  on  Jan.  1,  1922,  and  the 
period  of  service  would  include  service  rendered  before  Jan.  1,  1922. 

H.  Provisions  Regarding  Withdrawals  from  Service  on  or  after 
Age  6$  (Police  and  Fire  57)  if  Employe  Entered  Service 
before  Age  50.  (Police  and  Fire  42) 

If  a  present  employe  resigns  or  is  dismissed  from  service  on  or 
after  attainment  of  age  65  (Police  and  Fire  57),  having  entered  the 
service  before  attainment  of  age  50  (Police  and  Fire  42),  he  will  not 
be  entitled  to  refunds  of  deductions  from  his  salary  for  Age  and  Serv- 
ice Annuity.  Instead,  he  will  enter  upon  annuity  immediately.  The 
amount  of  such  annuity  will  be  that  which  can  be  provided  from  the 
accumulation  to  his  credit  for  Age  and  Service  Annuity,  from  con- 
tributions of  both  the  public  and  himself,  on  the  date  when  he  resigns 
or  is  dismissed  from  service,  or  on  the  date  when  such  accumulation 
is  sufficient  to  provide  an  annuity  equal  to  that  which  a  future  entrant 
would  receive  who  is  of  the  same  age  at  entrance,  same  salary,  and 
same  period  of  service  as  such  present  employe,  whichever  event  first 
occurs,  computed  as  of  his  attained  age  on  the  date  when  such  event 
occurs. 

The  rate  of  interest  used  in  this  calculation  will  be  4  per  cent. 

59 


MAIN    PROVISIONS    OF   PLAN 

I.  Provisions  Regarding  Withdrawal  from  Service  on  or  after 
Age  65  (Police  and  Fire  57)  if  Employe  Entered  Service 
after  Age  50  (Police  and  Fire  42) 

These  provisions  are  the  same  as  those  stated  under  "I,"  modified 
as  explained  in  "H"  above. 

WIDOWS'  ANNUITIES 

(Present  Employes) 

A.  Contributions  of  Employes 

Deduct  1  per  cent  from  each  payment  on  account  of  salary  of  each 
man  employe  for  a  Widow's  Annuity  for  a  possible  widow  of  such 
employe.  Such  deductions  are  to  be  made  when  deductions  are  made 
for  Age  and  Service  Annuity  for  the  employe,  whether  the  employe  is 
married  or  unmarried,  except  that : 

1.  If  a  present  employe  is  over  age  65  (Police  and  Fire  57)  on 
Jan.  1,  1922,  and  has  no  wife  on  said  date,  no  deductions  from  salary 
will  be  made  for  a  Widow's  Annuity  on  account  of  such  employe. 

2.  If  a  present  employe  is  over  age  65  (Police  and  Fire  57)  on 
Jan.  1,  1922,  and  has  a  wife  on  said  date,  but  such  wife  dies  before 
his  annuity  rights  are  determined,  no  further  deductions  from  salary 
will  be  made  for  a  Widow's  Annuity  on  account  of  such  employe. 

B.  Contributions  of  Public 

For  a  Widow's  Annuity,  the  public  would  pay  into  the  fund,  on 
behalf  of  each  man  employe,  3  per  cent  of  the  salary  of  the  employe 
on  Jan.  1,  1922  (Police  and  Fire  3^2  per  cent),  for  each  year  of 
service  rendered  by  the  employe  before  Jan.  1,  1922,  with  interest 
at  4  per  cent  per  annum. 

The  public  would  also  pay  into  the  fund  after  Jan.  1,  1922,  for 
a  Widow's  Annuity,  if  the  employe  remains  in  service,  2  per  cent  of 
the  salary  of  the  employe  (Police  and  Fire  2^2  per  cent)  until  the 
employe  attains  age  65  (Police  and  Fire  57),  or  until  the  end  of  the 
fifteen-year  period  when  the  employe  entered  the  service  after  age  50 
(Police  and  Fire  42). 

An  exception  to  the  foregoing  would  occur  in  the  case  where  an 
employe  is  over  age  65  (Police  and  Fire  57)  on  Jan.  1,  1922,  and 
has  no  wife  on  such  date.  In  such  a  case,  the  public  would  not  con- 
tribute for  a  Widow's  Annuity  on  account  of  such  employe. 

Another  exception  would  occur  in  the  case  where  an  employe 
enters  the  service  after  attainment  of  age  50  (Police  and  Fire  42), 
if  the  employe  had  a  wife  upon  attainment  of  age  65  (Police  and  Fire 
57),  and  this  wife  dies  while  the  employe  is  in  service  inside  of  the 

60 


MAIN   PROVISIONS   OF   PLAN 

fifteen-year  period.  In  such  a  case,  the  public  would  cease  to  con- 
tribute for  a  Widow's  Annuity  on  account  of  such  employe,  upon  death 
of  such  wife. 

C.  Allocation  of  Contributions 

Contributions  by  and  on  behalf  of  a  present  employe  to  provide 
a  Widow's  Annuity  on  account  of  such  employe,  made  after  Jan.  1, 
1922,  would  be  allocated  to  the  employe  when  made. 

Contributions  on  behalf  of  a  present  employe  to  provide  a  Widow's 
Annuity,  because  of  service  rendered  before  Jan.  1,  1922,  would  not 
be  allocated  to  the  employe  but  would  be  placed  in  a  general  fund 
from  which  that  part  of  the  annuity  provided  because  of  service 
rendered  before  Jan.  1,  1922,  would  be  paid. 

D.  When  Amount  of  Widow's  Annuity  Is  Determined 

The  provisions  under  "D"  for  "Annuities  for  Widows,  Future 
Entrants,"  would  apply  here  without  change  except  for  the  following 
addition : 

If  an  employe  is  over  age  65  (Police  and  Fire  57)  on  Jan.  1,  1922, 
and  has  a  wife  on  that  date,  but  this  wife  should  die  before  the  annuity 
rights  of  the  employe  are  determined,  the  employe  would  receive  refund 
of  the  accumulation  on  the  date  of  the  wife's  death  from  deductions 
from  his  salary  for  a  Widow's  Annuity.  After  that,  no  one  would  be 
eligible  for  a  Widow's  Annuity  because  of  this  employe's  service. 

E.  F,  G,  H,  I.     Provisions  Regarding  a  Widow's  Annuity  upon 

Withdrawal  of  the  Employe  from  Service  before  Age  65 
(Police  and  Fire  57) 

The  provisions  under  "E,"  "F,"  "G,"  "H"  and  "I"  for  Annuities 
of  Widows  of  Future  Entrants  apply  without  change  to  widows  of 
present  employes. 

PROVISIONS   FOR   CHILDREN'S   ANNUITIES   AND   FOR 
DISABILITY    BENEFITS 

(Present  Employes) 

The  provisions  for  children's  annuities  and  for  disability  benefits 
in  cases  of  future  entrants  would  apply  without  change  to  present 
employes. 

In  such  cases,  the  period  of  service  rendered  before  Jan.  1,  1922, 
would  be  considered  part  of  the  whole  period  of  service  of  the  employe. 

61 


MAIN   PROVISIONS  OF  PLAN 

SYSTEM  OF  TRANSFERS  FROM  ONE  SERVICE  TO 

ANOTHER 

The  plan  provides  for  transfer  of  an  employe  from  one  depart- 
ment of  the  city  to  another  where  he  would  come  under  a  different 
Fund.  In  any  such  case,  the  accumulation  to  the  credit  of  the  employe 
at  the  date  of  transfer  would  be  transferred  to  the  fund  to  which 
he  would  in  future  belong  and  his  prior  period  of  service  would  count 
as  service  in  the  fund  to  which  he  became  transferred. 


62 


CHAPTER  V 


EXPLANATION,    AND    ACCOMPANYING    TABLES, 

ILLUSTRATIVE    OF    THE    OPERATION    OF 

THE    PROPOSED    PLAN 


The  reader  will  probably  get  a  clearer  view  of  the  provisions  of 
the  proposed  plan  than  he  otherwise  would  if  we  assume  a. case  where 
an  employe  enters  a  service  at  a  youthful  age  and  by  illustration 
exhibit  the  kind  and  amounts  of  benefits  to  which  he  or  his  dependents 
would  be  entitled  under  any  contingency  that  mrght  arise. 

Assumed  Case  (Employe  Other  Than  a  Policeman  or  a  Fireman) 

Let  us  assume  for  illustrative  purposes  that  a  man  enters  the 
general  municipal  o*r  teaching  service  at  age  21,  on  a  salary  of  $1,620 
per  year,  and  remains  at  that  salary  during  his  entire  period  of  service, 
and  on  this  assumption,  see  what  benefits  would  accrue  to  him  or  his 
dependents  in  the  event  that  he  were  overtaken  by  sickness,  or  death, 
or  had  resigned  or  was  dismissed  from  service. 

Assumed  Case  (Employe  a  Policeman  or  a  Fireman) 

In  order  that  the  illustrations  may  apply  to  the  Police  and  Fire 
services  as  well  as  to  the  other  services,  we  shall  assume  a  case  applic- 
able to  a  policeman  or  a  fireman  who  enters  the  service  at  age  23 
on  a  salary  of  $1,764  per  year,  and  remains  at  that  salary  during  his 
period  of  service. 

Explanatory  Part  Refers  to  Either  Assumed  Case 

In  what  follows,  the  explantory  part  refers  to  either  assumed  case. 
The  figures  not  enclosed  in  "brackets,  [  ] ,  refer  to  the  general  municipal 
or  teaching  service,  and  the  figures  enclosed  in  brackets  to  the  police 
or  fire  service. 

The  amounts  that  would  be  paid  in  benefits  in  this  assumed  case 
would  apply  only  somewhat  roughly  to  those  who  enter  the  service 
in  the  future,  because  of  the  increases  in  salary  which  any  such  person 
would  receive  during  his  period  of  service.  They  apply  with  greater 
accuracy  to  those  now  in  service,  especially  to  the  older  employes, 
because  of  the  provision  that  credit  for  service  rendered  before  Jan. 
1,  1922,  would  be  on  the  basis  of  the  salary  of  the  employe  as  it  will 
be  on  Jan.  1,  1922,  and  not  on  the  basis  of  the  actual  salary  received 
by  him. 

63 


EXPLANATION    AND   TABLES 

The  amounts  that  would  be  paid  in  refunds  or  annuity  would  vary 
directly  as  the  salaries,  if  the  ages  at  entrance  and  the  periods  of 
service  are  the  same.  In  the  tables  following,  therefore,  that  relate 
to  annuities,  the  percentage  of  annuity  payment  to  salary  is  given  as 
well  as  the  amount  of  annuity.  To  determine  the  amount  of  annuity 
that  would  be  paid  when  the  salary  differs  from  that  in  the  assumed 
case,  multiply  the  amount  of  salary  by  the  percentage  of  annuity  pay- 
ment to  salary  in  the  table  and  the  result  is  the  amount  of  annuity 
that  would  be  paid  on  the  basis  of  the  different  salary. 


Table  Used  in  Determining  Amounts  of  Annuity  from  Accumu- 
lations 

In  determining  the  amount  of  annuity  payable  to  an  employe  from 
a  given  accumulation  to  his  credit  for  Age  and  Service  Annuity,  or  to 
the  widow  of  any  employe  who  died  before  his  annuity  was  deter- 
mined, the  actuary  used  the  following  table  in  all  cases  where  the  rate 
of  interest  to  be  taken  was  4  per  cent. 


Age 

When 

Annuity  is 

Determined 


Amount 

Necessary 

to  Provide 

$10  of 

Annuity 
each  year 


50 $133.11 

51 130.12 

52 127.08 

53 123.97 

54 120.81 

55 117.60 

56 114.35 

57 111.06 

58 107.74 

59..                                .  104.38 


Age 

When  _ 

Annuity  is 

Determined 


Amount 

Necessary 

to  Provide 

$10  of 

Annuity 
each  year 


60 $101.01 

61 97,62 

62 94.22 

63 90.83 

64 87.43 

65 84.05 

66 80.69 

67 77.35 

68 74.05 

69 70.80 

70..  67.60 


64 


EXPLANATION    AND   TABLES 

Accumulation   Table    (Employe    Other   Than   a    Policeman    or   a 
Fireman) 

If  the  employe  in  the  assumed  case  lives  to  age  65  and  remains  in 
service  until  then,  the  accumulation  to  his  credit  from  his  own  contribu- 
tions and  from  contributions  of  the  public  on  his  behalf,  at  the  ends 
of  his  several  years  of  service,  will  be  as  in  Table  I,  following: 

TABLE  I 

Showing  the  Accumulation  That  Would  Be  to  the  Credit  of  an  Employe 
Other  Than  a  Policeman  or  a  Fireman  at  the  Ends  of  His  Several  Years 
of  Service,  if  His  Salary  During  His  Period  of  Service  Is  $1,620  Per 
Year.  Interest  Earnings  Computed  at  4  Per  Cent  Per  Annum. 


End 
Year 

of                    Accumulation  from 
of                Contributions  for  Age 

Accumulation  from 
Contributions  for 

Service                 &  Service  Annuity  by 
Employe          Public 

Widow's  Annuity  by 
Total            Employe         Public 

Total 

1  

$     49 

$     99 

$       148 

$     16 

$     33 

$       49 

2  

101 

202 

303 

34 

67 

101 

3  

154 

309 

463 

51 

103 

154 

4  

210 

420 

630 

70 

140 

210 

5  

268 

536 

804 

89 

179 

268 

6  

328 

656 

984 

109 

219 

328 

7  

391 

782 

1,173 

130 

261 

391 

8  

456 

912 

1,368 

152 

304 

456 

9  

524 

1,047 

1,571 

175 

349 

524 

10  

594 

1,188 

1,782 

198 

396 

594 

11  

667 

1,335 

2,002 

222 

445 

667 

12  

743 

1,487 

2,230 

248 

496 

744 

13  

823 

1,645 

2,468 

274 

548 

822 

14  

905 

1,810 

2,715 

302 

603 

905 

15  

991 

1,982 

2,973 

330 

661 

991 

16  

1,080 

2,160 

3,240 

360 

720 

1,080 

17  

1,173 

2,345 

3,518 

391 

782 

1,173 

18  

1,269 

2,538 

3,807 

423 

846 

1,269 

19  

1,369 

2,738 

4,107 

456 

913 

1,369 

20  

1,473 

2,947 

4,420 

491 

982 

1,473 

21  

1,582 

3,164 

4,746 

527 

1,055 

1,582 

22  

1,695 

3,389 

5,084 

565 

1,130 

1,695 

23  

1,812 

3,624 

5,436 

604 

1,208 

1,812 

24  

1,934 

3,868 

5,802 

645 

1,289  * 

1,934 

25  

2,061 

4,121 

6,182 

687 

,374 

2,061 

26  

2,193 

4,385 

6,578 

731 

,462 

2,193 

27  

2,330 

4,660 

6,990 

777 

,553 

2,330 

28  

2,472 

4,945 

7,417 

824 

,648 

2,472 

29  

2,621 

5,242 

7,863 

874 

,747 

2,621 

30  

2,775 

5,550 

8,325 

925 

,850 

2,775 

31  

2,936 

5,871 

8,807 

979 

,957 

2,936 

32  

3,102 

6,205 

9,307 

1,034 

2,068 

3,102 

33  

3,276 

6,552 

9,828 

1,092 

2,184 

3,276 

34  

3,457 

6,913 

10,370 

1,152 

2,304 

3,456 

35  

3,644 

7,289 

10,933 

1,215 

2,430 

3,645 

36  

3,840 

7,679 

11,519 

1,280 

2,560 

3,840 

37  

4,043 

8,085 

12,128 

1,348 

2,695 

4,043 

38  

4,254 

8,508 

12,762 

1,418 

2,836 

4,254 

65 


EXPLANATION    AND    TABLES 

Accumulation  Table  (Employe  a  Policeman  or  a  Fireman) 

If  the  employe  in  the  assumed  case  lives  to  age  57  and  remains  in 
service  until  then,  the  accumulation  to  his  credit  from  his  own  contri- 
butions and  from  contributions  of  the  public  on  his  behalf,  at  the 
ends  of  his  several  years  of  service,  will  be  as  in  Table  II,  following: 

TABLE  II 

Showing  the  Accumulation  That  Would  Be  to  the  Credit  of  a  Policeman 
or  a  Fireman  at  the  Ends  of  His  Several  Years  of  Service,  if  His  Salary 
During  His  Period  of  Service  Is  $1,764  Per  Year.  Interest  Earnings 
Computed  at  4  Per  Cent  Per  Annum. 


End  of 
Year   of 

Accumulation  from 
Contributions  for  Age 

Accumulation  from 
Contributions  for 

Service 

&  Service  Annuity  by 

Widow's  Annuity  by 

Employe 

Public 

Total 

Employe 

Public 

Total 

1   

$     54 

$       162 

$     216 

$     18 

$     45 

$     63 

2  

110 

330 

440 

37 

92 

129 

3  

168 

505 

673 

56 

140 

196 

4  

229 

686 

915 

76 

191 

267 

5  

292 

876 

1,168 

97 

243 

340 

6  

357 

1,072 

1,429 

119 

298 

417 

7  

426 

1,277 

1,703 

142 

355 

497 

8  

496 

1,489 

1,985 

165 

414 

579 

9  

570 

1,711 

2,281 

190 

475 

665 

10  

647 

1,941 

2,588 

216 

539 

755 

11  ..  

727 

2,180 

2,907 

242 

606 

848 

12  

810 

2,429 

3,239 

270 

675 

945 

13  

..-  896 

2,688 

3,584 

299 

747 

1,046 

14  

986 

2,957 

3,943 

329 

821 

1,150 

15  

1,079 

3,237 

4,316 

360 

899 

1,259 

16  

1,176 

3,528 

4,704 

382 

.   955 

1,337 

17  

1,277 

3,831 

5,108 

426 

1,064 

1,490 

18  

1,382 

4,145 

5,527 

461 

1,152 

1,613 

19  

1,491 

4,473 

5,964 

497 

1,242 

1,739 

20  

1,605 

4,814 

6,419 

535 

1,337 

1,872 

21  

1,723 

5,168 

6,891 

574 

1,435 

2,009 

22  

1,845 

5,536 

7,381 

615 

1,538 

2,153 

23  

1,973 

5,919 

7,892 

658 

1,644 

2,302 

24  

2,106 

6,317 

8,423 

702 

1,755 

2,457 

25  

2,244 

6,732 

8,976 

748 

1,870 

2,618 

26  

2,388 

7,163 

9,551 

796 

1,990 

2,786 

27  

2,537 

7,611 

10,148 

846 

2,114 

2,960 

28  

2,692 

8,077 

10,769 

897 

2,244 

3,141 

29  

2,854 

8,562 

11,416 

951 

2,378 

3,329 

30  

3,022 

9,066 

12,088 

•1,007 

2,518 

3,525 

31  

3,197 

9,590 

12,787 

1,066 

2,664 

3,730 

32  

3,378 

10,135 

13,513 

1,126 

2,815 

3,941 

33  

3,567 

10,702 

14,269 

1,189 

2,973 

4,162 

34  

3,764 

11,292 

15,056 

1,255 

3,137 

4,392 

66 


EXPLANATION    AND   TABLES 

Provisions  Affecting  Employe  from  the  First  to  the  Fourth  Year 
of  Service,  Inclusive 

During  the  first  four  years  of  service,  the  employe,  or  his  depend- 
ents, would  be  eligible  for  the  following  benefits : 

a)  Sickness  and  Accident  Benefits  in  the  event  that  he  became 
disabled,  but  not  as  a  consequence  of  the  performance  of  duty.  These 
would  continue  during  one-fourth  of  the  period  of  service  of  the  em- 
ploye before  he  was  disabled.  The  amount  of  such  benefits  would  be 
50  per  cent  of  salary  ($1,620),  less  4  per  cent  of  salary  deducted  for 
Age  and  Service  Annuity  and  Widow's  Annuity,  or  $746.20  per  year. 
[Police  and  Fire,  50  per  cent  of  $1,764  less  4  per  cent,  or  $811.44 
per  year.] 

b}  Benefits  in  the  event  of  disability  incurred  in  performance 
of  duty.  These  will  continue  during  disability  until  the  employe  attains 
age  65  [Police  and  Fire  57].  The  amount  ,of  benefits  will  be  55  per 
cent  of  salary.  The  public  will  contribute  each  year  for  Age  and 
Service  Annuity  and  -Widow's  Annuity  amounts  equal  to  those  which 
both  the  employe  and  the  public  would  have  contributed  if  the  employe 
were  still  at  work,  so  that  when  he  attains  age  65  [Police  and  Fire  57], 
he  can  retire  on  an  Age  and  Service  Annuity  with  an  annuity  also 
provided  for  his  wife  if  he  is  a  married  man. 

If  the  employe  is  killed  while  in  the  performance  of  duty,  or 
receives  injuries  while  in  the  performance  of  duty  from  which  he 
afterward  dies,  his  widow  will  receive  an  annuity  in  amount  equal  to 
that  which  she  would  receive  if  her  husband  had  lived  to  age  65 
[Police  and  Fire  57]  and  during  this  period  had  the  same  salary  as  he 
had  at  the  time  of  his  death  or  disability.  In  either  assumed  case,  this 
would  be  75  per  cent  of  the  employe's  salary  if  she  is  not  younger  than 
10  years  younger  than  her  husband.  See  Table  III,  page  69,  or  Table 
IV,  page  70.  This  is  provided  she  does  not  marry.  If  she  marries, 
her  annuity  after  marriage  would  be  that  which  she  would  have  re- 
ceived if  her  husband  had  died,  not  as  a  result  of  the  performance  of 
duty. 

c)  Annuity  for  his  widow  in  the  event  that  he  dies  while  in 
service  but  not  as  a  result  of  the  performance  of  duty.  The  amount 
of  such  annuity  would  be  that  which  could  be  provided  from  the  total 
accumulation  to  the  employe's  credit  at  the  time  of  his  death  according 
to  the  age  of  the  widow  at  such  time.  In  this  case,  if  he  died,  say 
at  the  end  of  the  fourth  year,  the  widow  would  receive  an  annuity 
of  the  amount  which  the  sum  of  $630  and  $210,  namely  $840,  would 
provide.  (See  Table  I.)  This  would  be  $44  per  year  if  she  were 
5  years  younger  than  he  was,  or  $46  if  she  were  of  equal  age  with 

67 


EXPLANATION    AND   TABLES 

him,  or  older.  (See  Table  III.)  [Police  and  Fire,  the  sum  of  $915 
and  $267,  or  $1,182.  (See  Table  II.)  Annuity  of  $63  per  year  if 
she  were  5  years  younger  than  he  was,  or  $65  per  year  if  she  were 
of  equal  age  with  him  or  older.  (See  Table  IV.)]  For  other  differ- 
ences in  ages,  the  amounts  would  be  different. 

This  is  a  small  amount,  so  in  cases  where  an  employe's  death  oc- 
curs during  the  earlier  years  of  service,  a  provision  would  be  made  for 
paying  the  accumulation  in  a  few  instalments  instead  of  paying  an  an- 
nuity throughout  the  life  of  the  widow. 

Children  under  18  years  of  age  of  the  employe  would  not  be  eli- 
gible for  annuity  because  the  employe  was  not  as  yet  in  service  for 
four  years. 

d}  Refunds  of  his  ,own  contributions  for  Age  and  Service 
Annuity  and  Widow's  Annuity  with  4  per  cent  interest,  in  the  event 
of  resignation  or  dismissal  from  service.  Thus,  if  he  resigned  from 
service  at  the  end  of  his*  fourth  year  of  service,  he  would  receive 
in  refund  the  sum  of  $210  and  $70,  or  $280.  (See  Table  I.)  [Police 
and  Fire,  the  sum  of  $229  and  $76,  or  $305.  (See  Table  II.)] 

Provisions  Affecting  Employe  from  the  Fifth  to  the  Tenth  Year 

of  Service,  Inclusive 

During  this  period,  the  provisions  stated  above  under  the  heading 
"Provisions  Affecting  Employe  from  the  First  to  the  Fourth  Year  of 
Service,  Inclusive"  would  apply.  Also  the  additional  one  that  children 
under  18  years  of  age  would  be  eligible  for  annuity  in  the  event  that 
the  employe  died  while  in  service. 

During  these  years  the  amount  of  benefit  payable  as  stated  under 
a  and  b  above  would  remain  the  same.  The  benefit  under  c  would, 
of  course,  increase.  For  instance,  if  the  employe  died  after  his  ninth 
year  of  service,  the  amount  of  accumulation  to  provide  a  Widow's 
Annuity  would  be  the  sum  of  $1,571  and  $524,  or  $2,095  (See  Table 
I),  and  the  amount  of  the  Widow's  Annuity  would  be  $110  per  year  • 
if  she  were  ten  years  younger  than  he  was,  or  $114  per  year 
if  she  were  five  years  younger  than -he  was,  or  $118  per  year  if  she 
were  of  equal  age  with  him  or  older.  (See  Table  III.)  [Police  and 
Fire,  the  sum  of  $2,281  and  $665,  or  $2,946.  (See  Table  II.)  Annuity 
of  $157  per  year  if  she  were  ten  years  younger  than  he  was;  $162  per 
year  if  she  were  five  years  younger  than  he  was,  or  $169  per  year  if 
she  were  of  equal  age  with  him  or  older.  (See  Table  IV.)] 

The  amount  payable  in  refund  as  stated  under  d  would,  of  course, 
increase  as  the  years  of  service  increase.  For  instance,  if  he  resigned 
or  was  dismissed  from  service  at  the  end  of  his  ninth  year  of  service, 

68 


EXPLANATION    AND   TABLES 

he  would  receive  in  refund  the  sum  of  $524  and  $175,  or  $669.  (See 
Table  I.)  [Police  and  Fire,  the  sum  of  $570  and  $190  or  $760. 
(See  Table  II.)] 

TABLE  III 

Showing  the  Amount  of  a  Widow's  Annuity  in  the  Assumed  Case,  Where 
the  Employe  Is  Other  Than  a  Policeman  or  a  Fireman,  for  Certain  As- 
sumed Ages  of  the  Widow  if  the  Employe  Dies  in  Service  before  Attain- 
ment of  Age  65,  after  the  Years  of  Service  Indicated.  Also  the  Percent- 
age Which  Such  Annuity  Bears  to  Salary.  Salary  $1,620  Per  Year. 

Amount  of  Widow's  Annuity  and  Percentage  Which  Such  An- 
nuity Bears  to  Salary,  if  the  Age  of  the  Wife  as  Compared 
with  That  of  Her  Husband  Is: 


Years                              Age  of 
of                              Employe 

10  Years  Younger        5  Years  Younger    Of  Same  Age  or  Older 
Percent.                            Percent.                           Percent. 

Service 

at  Time 

Amount 

Annuity 

Amount 

Annuity 

Amount  Annuity 

before 

of 

ol 

Bears  to 

of 

Bears  to 

of        I 

tears  to 

Death 

Death 

Annuity 

Salary 

Annuity 

Salary 

Annuity 

Salary 

1  . 

.    22 

$       11 

0.6 

2  

.    23 

22 

1.3 

3  

.  24 

33 

2.1 

4  

.  25 

44 

2.7 

46 

2.8 

5  

.  26 

57 

3.5 

59 

3.6 

6  

.  27 

70 

4.3 

72 

4.5 

7  

.  28 

84 

5.2 

87 

5.3 

8  

.  29 

98 

6.1 

102 

6.3 

9  

.  30 

110 

6.8 

114 

7.0 

118 

7.3 

10  

.  31 

126 

7.8 

130 

8.0 

135 

8.3 

11  

.  32 

142 

8.8 

147 

9.1 

153 

9.5 

12  

.  33 

159 

9.8 

165 

10.2 

172 

10.6 

13  

.  34 

177 

10.9 

184 

11.4 

193 

11.9 

14  

.  35 

196 

12.1 

204 

12.6 

214 

13.2 

15  

.  36 

216 

13.4 

225 

13.9 

237 

14.6 

16  

.  37 

238 

14.7 

248 

15.3 

261 

16.1 

17  

.  38 

260 

16.1 

272 

16.8 

287 

17.7 

18  

.  39 

284 

17.5 

297 

18.3 

315 

19.4 

19  

.  40 

309 

19.1 

324 

20.0 

345 

21.3 

20  ,  

.  41 

335 

20.7 

353 

21.8 

376 

23.2 

21  :.. 

.  42 

363 

22.4 

383 

23.6 

410 

25.3 

22  

.  43 

393 

24.2 

415 

25.6 

446 

27.5 

23  

.  44 

424 

26.2 

450 

27.8 

485 

29.9 

24  

.  45 

458 

28.2 

487 

30.0 

526 

32.5 

25  

.  46 

493 

30.4 

526 

32.5 

571 

35.2 

26  

.  47 

531 

32.8 

568 

35.1 

619 

38.2 

27  

.  48 

571 

35.2 

613 

37.8 

671 

41.4 

28  

.  49 

614 

37.9 

661 

40.8 

727 

44.9 

29  

.  50 

660 

40.7 

713 

44.0 

788 

48.6 

30  

.  51 

708 

43.7 

'    769 

47.5 

853 

52.7 

31  

.  52 

760 

46.9 

829 

51.2 

924 

57.0 

32  

.  53 

816 

50.4 

894 

55.2 

1.001 

61.8 

33  

.  54 

876 

54.1 

963 

59.5' 

1.085 

67.0 

34  

.  55 

941 

58.1 

1,039 

64.1 

1,176 

72.6 

35  

.  56 

1,010 

62.3 

1,120 

69.2 

1,215 

75.0 

36  

.  57 

1,084 

66.9 

1,209 

74.6 

37  

.  58 

1,164 

71.9 

1,215 

75.0 

38  

.  59 

1,215 

75.0 

Note  —  Referring 

to  Table 

IV.,  page  70,  the 

amount  of 

annuity  received  by  the 

widow 

of  a  p 
woula 


policeman  or  a  fireman  in  service  on  January  1,  1921,  would  be  the  amount  which  she 
1  receive  under  the  provisions  of  the  present  act  where  such  provides  an  annuity  of 
greater  amount  than  the  percentage  in  the  table  would  indicate.  In  other  cases,  her  an- 
nuity would  be  that  which  would  be  determined  according  to  the  methods  used  in  deter- 
mining the  annuities  in  Table  IV  in  the  assumed  case. 

69 


EXPLANATION   AND   TABLES 

TABLE  IV 

Showing  the  Amount  of  a  Widow's  Annuity  in  the  Assumed  Case,  Where 
the  Employe  Is  a  Policeman  or  a  Fireman,  for  Certain  Assumed  Ages  of 
Widows  if  the  Employe  Dies  in  Service  before  Attainment  of  Age  57, 
after  the  Years  of  Service  Indicated.  Also  the  Percentage  Which  Such 
Annuity  Bears  to  Salary.  Salary  $1,764  Per  Year. 

Amount  of  Widow's  Annuity  and  Percentage  Which  Such  An- 
nuity Bears  to  Salary,  if  the  Age  of  the  Wife  as  Compared 
with  That  of  Her  Husband  Is : 

Years  Age  of         10  Years  Younger        5  Years  Younger    Of  Same  Age  or  Older 

of  Employe  Percent.  Percent.  Percent. 

Service  at  Time     Amount    Annuity          Amount    Annuity          Amount    Annuity 

before  of  of          Bears  to  of          Bears  to  of          Bears  to 

Death  Death       Annuity      Salary  Annuity      Salary  Annuity      Salary 

1 24        $ $ $     15  0.9 

2 25  30          1.7  31  1.7 

3 26  46  2.6  47  2.7 

4 27  63          3.6  65  3.7 

5 28  81  4.6  84  4.7 

6 29  99          5.6  103  5.9 

7 30  116          6.6  119          6.8,  124  7.0 

8 31  136          7.7  140          7.9  146  8.3 

9 32  157          8.9  162  9.2  169  9.6 

10 33  179        10.1  185  10.5  194  11.0 

11 34  202         11.5  210  ll.P  220  12.5 

12 35  227        12.9  236  13.4  247  14.0 

13 36  253         14.3  263  14.9  277  15.7 

14 37  280        15.9  292  16.6  308  17.5 

15 38  309        17.5  323  18.3  342  19.4 

16 39  338        19.1  354  20.0  375  21.3 

17 40  372        21.1  390  22.1  415  23.5 

18 41  406        23.0  427  24.2  456  25.8 

19 42  442        25.1  466  26.4  499  28.3 

20 43  480        27.2  508  28.8  545  30.9 

21 44  521        29.5  552  31.3  595  33.7 

22 45  564        32.0  600  34.0  649  36.8 

23 46  610        34.6  650  36.9  706  40.0 

24 47  659        37.3  705  39.9  768  43.5 

25 48  710        40.3  763  43.2  835  47.3 

26 49  766        43.4  825  46.8  907  51.4 

27 50  825        46.7  892  50.5  985  55.8 

28 51  888        50.3  963  54.6  1,069  60.6 

29 52  955        54.1  1,041  59.0  1,160  65.8 

30 53  1,124  63.7  1,259  71.4 

31 54  1,214  68.8  1,323  75.0 

Provisions  Affecting  Employe  from  the  Tenth  Year  of  Service  to 
Attainment  of  Age  55  (Police  and  Fire  50) 

During  this  period  of  service,  the  provisions  stated  under  a,  b,  c, 
and  d  under  the  heading  "Provisions  Affecting  Employe  from  the  First 
to  the  Fourth  Year  of  Service,  Inclusive"  would  apply.  After  the 
twentieth  year  of  service,  however,  the  limitation  that  disability  benefits 
would  be  payable  for  not  longer  than  five  years  would  apply  in  cases 
of  disability  incurred  not  in  the  performance  of  duty. 

In  addition,  the  employe  would  now  have  the  option,  upon  resig- 
nation or  dismissal  from  service,  of  either  taking  refunds,  or  of  taking 
an  annuity.  If  he  elects  to  take  an  annuity,  however,  he  cannot  enter 
upon  it  until  he  attains  age  55  [Police  and  Fire  50]. 

70 


EXPLANATION    AND   TABLES 

In  the  assumed  case,  the  amount  of  annuity  that  would  be  payable 
is  stated  in  Table  V  [Police  and  Fire  Table  VI].  From  this  table  we 
see  by  way  of  illustration  that  if  the  employe  resigns  or  is  dismissed 
from  service  after  15  years  of  service,  his  annuity  would  be  $310  per 
year  for  life,  beginning  when  he  attains  age  55.  [Police  and  Fire, 
$297  per  year  for  life,  beginning  when  he  attains  age  50.] 

The  employe  may  ask  for  refunds  at  any  time  after  resignation 
or  dismissal  from  service,  but  if  he  has  had  at  least  ten  years  of  service 
to  his  credit,  then,  until  he  asks  for  refunds,  it  will  be  assumed  that 
he  has  in  mind  taking  his  annuity. 

If  the  employe  resigns  or  is  dismissed  from  service  and  retains 
his  annuity  rights,  he  must  also  retain  annuity  rights  for  his  wife  if 
he  is  a  married  man. 

If  such  employe  lives  to  age  55  [Police  and  Fire  50],  the  amount 
of  annuity  which  his  widow  would  receive  and  the  percentage  such 
annuity  payment  is  of  salary  are  given  in  Table  VII.  [Police  and 
Fire,  Table  VIII.] 

TABLE  V 

Showing  the  Amount  of  Annuity,  the  Employe  (Other  Than  a  Policeman 
or  a  Fireman)  in  the  Assumed  Case,  Would  Receive  if  He  Resigned  or 
Was  Dismissed  from  Service  at  the  End  of  the  Year  of  Service  Indi- 
cated. Salary  $1,620  Per  Year.  When  the  Employe  Is  under  Age  55  on 
Date  of  Resignation  or  Dismissal,  Annuity  Begins  at  Age  55.  In  Other 
Cases  It  Begins  on  Date  of  Resignation  or  Dismissal. 

Age  of  Employe  Percentage 

Years  of  on  Date  of  Annuity 

Service   of  Resignation  Amount  of  Bears  to 

Employe  or   Dismissal  Annuity  Salary 

11    32  $  144  8.9 


12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
29 
30 
31 
32 
33 
34 
35 
36 
37 


33  181  11.2 

34  221  13.6 

35  264  16.3 

36  310  19.2 

37  359  22.2 

38  411  25.4 

39  466  28.8 

40  523  32.3 

41  583  36.0 

42  604  37.3 

43  626  38.6 

44  646  39.9 

45  667  41.1 

46  686  42.4 

47  705  43.5 

48  724  44.7 

49  742  45.8 

50  761  47.0 

51  778  48.0 

52  795  49.1 

53  812  50.1 

54  828  51.1 

55  882  54.4 

56  956  59.0 

57  1,037  64.0 


58  1,126  69.5 

38  or  more  59  or  older       1,215  75.0 

71 


EXPLANATION  AND  TABLES 


TABLE  VI. 

Showing  the  Amount  of  Annuity  a  Policeman  or  a  Fireman  in  the  As- 
sumed Case  Would  Receive  if  He  Resigned  or  Was  Dismissed  From 
Service  at  the  End  of  the  Year  of  Service  Indicated.  Salary  $1,764  Per 
Year.  When  the  Employe  Is  under  Age  50  on  Date  of  Resignation  or 
Dismissal,  Annuity  Begins  at  Age  50.  In  Other  Cases  It  Begins  on  Date 
of  Resignation  or  Dismissal. 


Years  of 
Service  oi 
Employe 


Age  of  Employe 
on  Date  of 
Resignation 
or  Dismissal 


11 34 

12 35 

13 36 

14 37 

15 38 

16 39 

17 40 

18 41 

19 42 

20 43 

21 44 

22 45 

23 46 

24 47 

25 48 

26 49 

27 50 

28 51 

29 52 

30 53 

31 54 

32 55 

33 56 

34  ."  57 


Amount  of 
Annuity 

$  117 

155 

197 

242 

291 

344 

399 

458 

519 

584 

605 

627 

648 

668 

687 

707 

762 

828 

898 

975 
1,058 
1,149 
1,248 
1,323 


Percentage 

Annuity 

Bears  to 

Salary 

6.6 

8.8 
11.2 
13.7 
16.5 
19.5 
22.6 
25.9 
29.4 
33.1 
34.3 
35.5 
36.7 
37.9 
39.0 
40.1 
43.2 
46.9 
50.9 
55.3 
60.0 
65.1 
70.7 
75.0 


Note — In  the  cases  of  policemen  and  firemen  who  will  be  in  service  on  December  31,  1920, 
the  annuities  would  be  50  per  cent  of  salary,  after  22  years  of  service,  until  the  annuity  as 
determined  according  to  the  methods  used  in  the  assumed  case  would  exceed  SO  per  cent  of 
salary.  For  years  from  the  10th  to  the  22nd  of  service,  and  after  the  annuity  computed  as 
in  the  assumed  case  would  exceed  50  per  cent  of  salary,  the  annuity  in  any  case  would  be 
that  determined  according  to  the  methods  used  in  the  assumed  case. 


72 


EXPLANATION    AND   TABLES 


TABLE  VII. 

Showing  the  Amount  of  a  Widow's  Annuity  in  the  Assumed  Case,  Where 
the  Employe  Is  Other  Than  a  Policeman  or  a  Fireman,  for  Certain  As- 
sumed Ages  of  the  Widow,  if  the  Employe  Resigns  or  Is  Dismissed  from 
Service  after  the  Years  of  Service  Indicated.  Also,  the  Percentage  Which 
Such  Annuity  Bears  to  Salary.  Salary  $1,620  Per  Year. 

Amount  of  Widow's  Annuity  and  Percentage  Which  Such  An- 
nuity Bears  to  Salary,  if  the  Age  of  the  Wife  as  Compared 
with  That  of  Her  Husband  Is: 

10  Years  Younger        5  Years  Younger   Of  Same  Age  or  Older 

Age                  .  Percent.                           Percent.  Percent. 

Years                              Upon         Amount  Annuity         Amount   Annuity  Amount    Annuity 

of                                 With-               of  Bears  to               of        Bears  to  of         Bears  to 

Service                            drawal        Annuity  Salary           Annuity    Salary  Annuity     Salary 

11..          .  32   $  119    7.4   $  151    9.3  $  202   12.5 

12 33     150    9.3     190   11.7  254    15.7 

13 34     184    11.3     232    14.3  •  311    19.2 

14 35     219    13.5     278    17.1  371    22.9 

15 36     258   15.9     326   20.2  436   26.9 

16 37     298    18.4     378   23.3  505    31.2 

17 38     341   21.1     433   26.7  579   35.7 

18 39     387   23.9     490   30.3  655   40.5 

19 40     434   26.8     550   34.0  .736   45.4 

<>0 41     484   29.9     613   37.8  820   50.6 

21  .  .  .T 42     502   31.0     636   39.3  850   52.5 

22 43     519    32.1      658    40.6  880    54.3 

23  .  • 44     537    33.1      680    42.0  909    56.1 

24 45     553   34.2     701    43.3  937   57.9 

25 46     570   35.2     722   44.6  965   59.6 

26 47     586    36.1      742    46.8  992    61.2 

27 48     601    37.1      762    47.0  1,019    62.9 

28 49     616   38.1     781    48.2  1,044   64.5 

29 50     631    39.0     800   49.4  1,070   66.0 

30 51     646   39.9     819   50.5  1,094   67.5 

31 52     660   40.8     837   51.6  1,118   69.0 

32 53     674   41.6     854   52.7  1,142   70.5 

33 54     688   42.5     872   53.8  1,165   71.9 

34 55     770   47.5     966   59.6  1,215   75.0 

35 56     808   49.9    1,018   62.8     

36 57     848   52.3    1,073   66.2     

37 58     888   54.8    1,132   69.9     

38 59     933    57.6    1,198    74.0      

39 60     977   60.3    1,215    75.0     

40 61    1,024    63.2      

41 62    1,071   66.1     ...  :.. 

42 63    1,123    69.3      

43 64    1,173   72.4    .... 

44 65    1,215    75.0 


73 


EXPLANATION    AND    TABLES 

TABLE  VIII. 

Showing  the  Amount  of  a  Widow's  Annuity  in  the  Assumed  Case,  Where 
the  Employe  Is  a  Policeman  or  a  Fireman,  for  Certain  Assumed  Ages 
of  the  Widow,  if  the  Employe  Resigns  or  Is  Dismissed  from  Service 
after  the  Years  of  Service  Indicated.  Also  the  Percentage  Which  Such 
Annuity  Bears  to  Salary.  Salary  $1,764  Per  Year. 

Amount  of  Widow's  Annuity  and  Percentage  Which  Such  An- 
nuity Bears  to  Salary,  if  the  Age  of  the  Wife  as  Compared 
with  That  of  Her  Husband  Is: 

10  Years  Younger        5  Years  Younger    Of  Same  Age  or  Older 
Age  Percent.  Percent.  Percent. 

Years  Upon         Amount    Annuity         Amount    Annuity         Amount  Annuity 

of  With-  of         Bears  to  of         Bears  to  of        Bears  to 

Service  drawal        Annuity     Salary  Annuity     Salary  Annuity    Salary 

11         34  $  111  6.3  $  137  7.8  $  177  10.0 

12         35  143  8.1  177  10.0  228  12.9 

13       36  179  10.1  220  12.5  285  16.1 

14         37  217  12.3  268  15.2  346  19.6 

15       38  259  14.7  318  18.1  412  23.3 

16         39  302  17.1  373  21.1  482  27.3 

17  .      40     349    19.8     430    24.4     556    31.5 

18  .        41      398    22.6     490    27.8     634   35.9 

19 42     450   25.5     554   31.4     716   40.6 

20  .'     43     504   28.5     620    35.2     802    45.5 

21     44     522    29.6     643    36.5     832    47.2 

22  .       ..'....  45  541  30.6  666  37.7  861    48.8 

23 46  558  31.7  688  39.0  889    50.4 

24 47  576  32.6  709  40.2  917   52.0 

25 48  593  33.6  730  41.4  944   53.5 

26  .       49  610  34.6  751  42.6  971    55.t) 

27 50  695  39.4  851  48.2  1,084   61.5 

28.      51  727  41.2  895  50.7  1,151    65.2 

29 52  762  43.2  943  53.5  1,224        69.4 

30 53  798  45.2  993  56.3  1,296        73.5 

31 54  836  47.4  1,045  59.2  1,323        75.0 

32 55  878  49.8  1,101  62.4             

33 56  923  52.3  1,163  65.9             

34 57  969  55.0  1,223  69.3              

If  such  employe,  after  resignation  ,or  dismissal  from  service,  should 
die  before  attaining  age  55  [Police  and  Fire  50],  his  widow,  if  any, 
will  be  eligible  for  annuity,  provided  they  were  married  before  he 
resigned  or  was  dismissed  from  service.  No  tables  illustrating  the 
amount  which  a  widow  would  receive  in  any  such  case  is  given  here. 
If  the  employe  should  leave  no  such  widow,  the  accumulation  from 
deductions  from  salary  at  the  time  of  his  death  would  be  refunded. 
If  he  left  such  a  widow  who  died  before  she  drew  in  annuity  an  amount 
equal  to  the  accumulation  from  deductions  from  salary  at  the  time  of 
his  death,  the  excess  of  such  accumulation  over  the  total  of  such 
amounts  paid  would  be  refunded. 

Provisions  Affecting  Employe  from  Attainment  of  Age  55  (Police 
and  Fire  50)  to  Attainment  of  Age  65  (Police  and  Fire  57) 

During  this  period,  the  provisions  stated  under  a,  b,  c,  and'  d 
under  the  heading  "Provisions  Affecting  Employe  from  the  First  to 
the  Fourth  Year  of  Service,  Inclusive"  would  apply,  except  as  follows : 

74 


EXPLANATION   AND   TABLES 

1.  The  limitation  applies  that  disability  benefits  would  be  payable 
for  not  longer  than  five  years  and  not  beyond  the  time  when  the  employe   • 
attains  age  65  (Police  and  Fire  57). 

2.  The  employe  upon  resignation  or  dismissal  from  service  will 
not  be  eligible  for  refunds  of  deductions  from  salary  with  interest,  for 
Age  and  Service  Annuity  purposes.     Instead,  he  will  enter  upon  Age 
and  Service  Annuity  immediately.     For  amount  of  such  annuity  in 
the  assumed  case,  see  Table  V  (Police  and  Fire  Table  VI). 

3.  If  the  employe  has  a  wife  at  the  time  of  resignation  or  dis- 
missal from  service,  such  wife  will  be  entitled  to  a  Widow's  Annuity. 
For  amount  of  such  annuity  see  Table  VII   (Police  and  Fire  Table 
VIII).     If  the  employe  has  no  wife  at  such  time,  he  will  be  entitled 
to  refunds  of  deductions  from  salary,  with  interest,  for  a  Widow's 
Annuity.     For  amount  of  such  refund  see  Table  I  (Police  and  Fire 
Table  II). 

Provisions  Affecting  Employe  upon  Attainment  of  Age  65  (Police 
and  Fire  57) 

If  the  employe  in  the  assumed  case  remains  in  service  to  age  65 
[Police  and  Fire  57],  then  upon  attainment  of  such  age,  his  annuity  . 
rights,  and  those  of  his  wife  if  he  has  a  wife  at  that  time,  will  be 
determined.  If  the  entire  accumulation  to  his  credit  for  an  Age  and 
Service  Annuity  were  used  to  provide  him  an  annuity,  his  annuity 
would  exceed  75  per  cent  of  salary  and  he  would  receive  in  refund 
the  difference  between  his  accumulation  for  Age  and  Service  Annuity 
at  the  time  he  attained  age  65  [Police  and  Fire  57],  and  the  accumula- 
tion necessary  to  provide  an  annuity  of  one-third  [Police  and  Fire  one- 
fourth]  of  75  per  cent  of  salary  at  that  age. 

If  the  employe  has  a  wife,  the  accumulation  to  provide  such  wife 
with  a  Widow's  Annuity  may  be  more  than  sufficient  to  provide  her 
with  an  annuity  equal  to  her  husband's  annuity.  Refund  in  any  such 
case  of  excess  of  the  actual  accumulation  over  the  necessary  accumu- 
lation will  be  made.  If  the  employe  upon  attainment  of  age  65  [Police 
and  Fire  57]  has  no  wife,  all  the  accumulation  to  his  credit  from 
deductions  from  salary  to  provide  a  Widow's  Annuity  will  be  refunded. 
Thereafter  no  wife  of  such  employe  would  be  eligible  for  annuity. 

If  the  employe  dies  while  in  service,  leaving  no  widow,  or  if  he 
leaves  a  widow  who  died  before  she  has  received  in  annuity  an  amount 
equal  to  the  amount  of  the  accumulation  to  the  credit  of  the  employe 
when  he  attained  age  65  [Police  and  Fire  57],  from  deductions  from 
salary  for  Age  and  Service  Annuity  and  Widow's  Annuity,  the  excess 
of  the  accumulation  over  the  amount  received  in  annuity  will  be 
refunded.  If  he  dies  while  on  annuity,  leaving  no  widow,  or  if  he 

75 


EXPLANATION    AND   TABLES 

leaves  a  widow  who  dies  before  both  he  and  she  receives  in  annuity 
an  amount  equal  to  the  amount  of  such  accumulation,  the  excess  of 
such  accumulation  over  the  total  of  such  amounts  paid  will  be  refunded. 
After  attainment  of  age  65  [Police  and  Fire  57],  the  employe  would 
be  excluded  from  Sickness  and  Accident  Benefits,  and  would  be  exempt 
from  payment  for  Sickness  and  Accident  Benefits  or  toward  the  cost 
of  Administration  of  the  Fund. 

Amount  of  Age  and  Service  Annuity  and  Widow's  Annuity  When 
Employe  Entered  at  an  Age  Other  Than  That  Stated  in 
the  Assumed  Case 

If  an  employe  other  than  a  policeman  or  a  fireman  entered  the 
service  at  an  age  other  than  that-  stated  in  the  assumed  case,  at  a 
salary  of  $1,620  per  year,  and  remained  at  that  salary  during  his  period 
of  service,  the  amount  of  his  Age  and  Service  Annuity,  and. the  per- 
centage which  such  annuity  bears  to  salary,  upon  attainment  of  age  65 
would  be  as  follows: 

Age  at  Entrance  Amount  of  Annuity  Percentage 

25  $1,215  75.0 

30  1,215  75.0 

35  991  61.1 

40  736  45.4 

50  or  over  354  21.8 

If  the  employe  be  a  policeman  or  a  fireman,  the  amount  of  Age 
and  Service  Annuity  and  the  percentage  which  such  annuity  bears  to 
salary  ($1,764  per  year)  would  be  as  follows: 

Age  at  Entrance  Amount  of  Annuity  Percentage 

24  $1,285  72.8 

25  1,217  69.0 

26  1,151  65.3 

27  1,088  61.7 
30  914  51.8 
35  665  37.7 
42  or  over  389  22.0 

If  the  employe  remains  in  service  to  age  65  [Police  and  Fire  57], 
or  to  the  end  of  the  fifteen-year  period,  if  he  enters  after  attainment  of 
age  50  [Police  and  Fire  42],  the  amount  of  Widow's  Annuity  for  the 
wife  would  be  as  follows: 

Employe  Other  Than  a  Policeman  or  a  Fireman.     Salary  $1,620 

Age  of  Amount    of    Widow's    Annuity    and    Percentage    of    Annuity    to    Salary 

Employe  at  if  Wife  Is 

Entrance  10  Years  Younger  5  Years  Younger  Of  Same  Age  or  Older 

Amount       Percent.          Amount       Percent.         Amount         Percent. 


25  

$1,011 

62.4 

$1,215 

75.0 

$1,215 

75.0 

30  

....   784 

48.4 

1,044 

64.5 

1,215 

75.0 

35  , 

597 

36.8 

795 

49.1 

1,132 

69.9 

40   

443 

27.4 

590 

36.4 

841 

51.9 

50  or  over.  . 

213 

13.2 

284 

17.5 

404 

25.0 

76 


EXPLANATION    AND   TABLES 

Employe   a    Policeman   or   a    Fireman.      Salary    $1,764 

25 $870  49.3  $1,098  62.2  $1,323  75.0 

30 653  37.0  824  46.7  1,104  62.6 

35 475  26.9  600  34.0  803  45.5 

42  or  over 278  15.8  351  20.0  470  26.6 

Note — For  other  provisions  regarding  policemen  or  firemen  in  service  January   1,   1921, 
or  their  dependents,  see  page  64,  or  page  67. 

Widows'  Annuities 

The  tables  in  this  chapter  that  apply  to  widows  of  future  entrants 
will  apply  without  change  to  widows  of  present  employes  in  all  cases 
where  the  employe  remains  in  service  to  the  attainment  of  age  65 
[Police  and  Fire  57]. 

This  is  because  of  the  provision  in  the  plan  that  the  public  con- 
tributes for  a  Widow's  Annuity  because  of  past  service  of  -present 
employes  all  that  both  public  and  employe  would  have  contributed  if 
the  employe  had  been  under  the  provisions  of  the  plan  from  the 
beginning  of  his  service. 

In  the  case  of  the  death  of  an  employe  while  in  service  before 
the  attainment  of  age  65  [Police  and  Fire  57],  the  Widow's  Annuity 
would  be  less  than  that  stated  in  the  illustrations  for  future  entrants 
because  in  any  such  case  the  accumulations  to  the  credit  of  the  employe 
to  provide  an  Age  and  Service  Annuity  would  be  less  than  that  which 
would  be  to  the  credit  of  a  future  entrant  under  like  conditions. 

In  the  police  and  fire  services  the  difference  would  not  be  great, 
due  to  the  fact  that  the  contributions  required  from  future  entrants  for 
Age  and  Service  Annuity  do  not  differ  greatly  from  those  made  to 
existing  pension  funds.  In  the  teaching  service,  the  difference  would 
be  greater  than  in  the  police  and  fire  services,  and  in  the  municipal 
service,  still  greater. 

Age  and  Service  Annuities 

The  Age  and  Service  Annuity  of  a  present  employe  who  retires 
from  service  on  or  before  the  attainment  of  age  65  (Police  and  Fire- 
men 57),  would  be  less  than  that  of  a  future  entrant  because  the  pres- 
ent employe  would  not  have  made  as  great  contributions  to  the  fund  as 
a  future  entrant,  under  like  conditions,  would  have  made. 

In  the  most  unfavorable  case,  however,  namely,  where  an  em- 
ploye who  contributed  nothing  to  any  existing  pension  fund  is  of 
age  65  on  the  date  when  the  plan  takes  effect  and  retires  from  service 
immediately  after,  the  amount  of  Age  and  Service  Annuity  which  the 
employe  would  receive  would  be  two-thirds  of  the  amount  a  future 
entrant  under  like  conditions  would  receive. 


77 


CHAPTER  VI 


EXPERIENCE  OF  THE  UNITED  STATES  AND  OF  OTHER 

COUNTRIES    WITH    THE    OPERATION    AND 

GROWTH  OF  PENSION  LEGISLATION 

FOR  PUBLIC  EMPLOYES 


This  chapter  presents,  in  condensed  form,  a  survey  of  the  pension 
experience  of  the  United  States  and  of  other  countries,  in  compliance 
with  part-, of  the  duties  delegated  to  the  Milwaukee  Pension  Laws 
Commission  by  the  Act  creating  the  Commission. 

First  Pension  Projects  in  This  Country 

The  first  pension  projects  in  this  country  were  established  for  the 
purpose  of  providing  rewards  for  military  or  naval  service.  It  was 
not  until  the  year  1920  that  the  government  of  the  United  States 
enacted  pension  legislation  for  its  civil  servants  and  thereby  subscribed 
to  the  social  philosophy  which  demands  that  pensions  for  public 
employes  should  be  based  on  something  more  than  a  mere  sentimental 
consideration  or  a  reward  for  past  services.  The  federal  civil  service 
pension  act,  passed  recently,  is  based  on  the  social  philosophy  that 
the  government  is  justified  in  contributing  toward  such  pensions  be- 
cause it  is  receiving  its  equivalent  in  increasing  the  efficiency  of  its 
service. 

While  the  United  States  was  the  last  of  the  great  nations  of  the 
wprld  to  establish  a  pension  fund  for  its  civil  servants,  nearly  all  the 
states  ,of  the  union  have  enacted  laws  to  pension  public  servants, 
particularly  policemen,  firemen,  and  teachers.  Some  of  these  laws 
were  passed  as  long  as  fifty  years  ago,  but  the  great  majority  of 
pension  plans  were  not  enacted  into  law  until  after  1900,  and,  though 
the  number  of  pension  plans  in  this  country  exceeds-  300,  the  experience 
with  such  legislation  is  still  young.  It  may  be  said,  however,  that  it 
is  exceedingly  convincing  in  establishing  the  verity  that  nearly  all 
prevailing  pension  plans  are  based  upon  false  principles  as  well  as 
upon  unsound  financial  foundations. 

The  first  pension  fund  to  be  established  for  civil  servants  in  this 
country  was  created  for  the  benefit  of  the  police  force  of  the  city 
of  New  York  in  1857.  New  York  was  also  the  first  municipality  to 
establish  a  fund  for  its  firemen.  This  fund  was  placed  in  operation  in 
1871.  The  first  pension  fund  for  teachers  was  established  in  New  York 
in  1894.  The  first  fund  for  general  municipal  employes  was  established 
in  New  York  City  in  1894  for  the  specific  benefit  of  the  employes  of 
the  Board  of  Health.  Just  as  New  York  took  the  lead  in  establishing 

78 


HISTORY  OF  PENSIONS 

the  first  pension  funds,  so  its  commissions  also  are  among  the  first 
to  replace  -the  makeshift  schemes  with  scientific  systems  that  will  live 
for  all  time  without  imposing  larger  costs  for  maintenance  upon  one 
generation  than  upon  another. 

Pension  projects  for  public  servants  originated  in  this  country 
much  in  the  same  manner  that  they  originated  in  the  older  countries. 
In  a  generalization  on  the  subject  it  can  be  said  that  groups  of  men 
in  certain  well-organized  city  departments  banded  together  for  mutual 
protection  in  cases  of  sickness.  Other  benefits  were  added  gradually. 
At  first  all  participants  in  such  funds  were  required  to  make  contri- 
butions of  like  sums  or  agreed  to  subject  themselves  to  special 
assessments. 

Most  Funds  Are  Makeshifts 

For  the  first  few  years,  when  but  few  participants  needed  aid, 
the  income  from  such  sources  was  sufficient  to  meet  expenses.  As 
the  number  of  participants  who  needed  aid  increased  and-  as  more  and 
more  benefits  were  included,  it  was  soon  realized  that  larger  revenues 
were  needed  to  meet  the  mounting  costs.  In  cases  where  city  govern- 
ments did  not  come  to  the  assistance  of  such  funds  they  were  aban- 
doned. Where  outside  aid  was  procured  the  funds  survived  for  a 
longer  time.  As  soon  as  employes  realized  they  could  procure  revenues 
from  the  city  or  state  they  began  to  liberalize  their  benefits,  never 
taking  into  consideration  the  fact  that  with  the  incorporation  of  each 
new  benefit  they  were  adding  to  the  costs  of  maintaining  their  funds. 
However,  so  long  as  the  city  and  the  state  were  ready  to  aid  such 
funds,  they  continued  to  grow  and  to  multiply. 

It  was  not  long,  however,  before  legislators  began  to  balk  and 
to  question  the  advisability  of  assisting  such  funds.  The  cry  for 
more  money  and  for  further  amendments  finally  led  cities  and  states 
to  appoint  commissions  to  study  the  pension  situation  and  the  merit 
of  the  claims  of  employes.  To  date  about  twelve  of  such  commissions 
have  been  appointed  and  have  made  reports.  All  of  them  have  con- 
cluded that  the  prevailing  pension  funds  in  this  country  can  hardly 
be  dignified  with  the  term  "system."  A  study  of  their  reports  leads 
to  the  conclusion  that  the  prevailing  funds  should  be  characterized  as 
nothing  more  than  makeshifts,  for,  until  1913,  when  Massachusetts 
established  a  system  for  teachers,  there  was  no  pe*nsion  fund  in  this 
country  worthy  of  a  more  dignified  name. 

An  examination  of  the  prevailing  makeshifts  reveals  the  fact  that 
nearly  all  the  proven  fallacies  and  proven  erroneous  principles  of  the 
early  pension  makeshifts  of  Europe  were  incorporated  in  the  laws  en- 
acted in  this  country  with  the  result  that,  unless  revised,  they  will  prove 
as  costly  as  the  European  makeshifts  where  some  governments  are  pay- 

79 


HISTORY  OF  PENSIONS 

ing  as  high  as  40  per  cent  of  the  payrolls  to  maintain  pension  payments. 
Most  of  the  older  schemes  in  this  country  already  are  on  the  verge  of 
bankruptcy.  A  great  many  of  them  have  been  abandoned  without  ful- 
filling their  obligations  to  participants. 

That  legislators  are  taking  cognizance  of  the  financial  unsoundness 
of  funds  is  made  manifest  in  the  most  recent  report  on  the  subject. 
This  report  was  made  in  April  of  this  year  by  the  Joint  Committee  on 
Taxation  and  Retrenchment  to  the  New  York  legislature. 

Among  other  things  this  official  report  declares : 

"The  pension  funds  in  municipalities  are  a  delusion  and  a  snare 
until  they  are  placed  on  an  actuarial  basis."  The  mayor  of  Troy  is 
quoted  as  stating  that  pension  funds  as  now  constituted  are  the  biggest 
jokes  in  municipal  government.  The  report  further  asserts  that  all  the 
funds  in  New  York  state,  except  that  of  the  teachers'  act,  are  funda- 
mentally unsound  and  must  be  radically  revised. 

/ 

Revision  of  Funds  Imperative 

What  that  committee  concluded  concerning  the  situation  in  the 
state  of  New  York  can  be  equally  as  well  concluded  concerning  the 
situation  in  every  state  in  'the  union  which  has  modeled  its  pension 
legislation  after  the  prevailing  fashion — "Revision  of  pension  funds  is 
imperative." 

Fortunately  in  the  United  States,  where  there  are  only  about  40 
funds  older  than  30  years,  the  cost  of  maintenance  has  not  reached  the 
enormous  cost  such  makeshifts  have  reached  in  European  countries, 
and  therefore  they  can  still  be  revised  without  placing  too  great  burden 
on  the  taxpayers.  An  idea  of  the  cost  of  revising  unsound  pension 
funds  can  be  gained  from  the  experience  of  Australia,  a  nation  that 
was  quick  to  abandon  unsound  schemes  as  soon  as  the  cost  of  main- 
taining them  became  apparent. 

Australia  established  an  unsound  plan  in  1884  and  in  1895  aban- 
doned the  fund,  but  in  order  to  make  good  its  promises,  Australia  as- 
sumed to  pay  all  its  obligations  to  participants  in  the  fund.  .  At  the 
time  of  abandonment,  the  amount  which  the  government  assumed  as 
a  debt  was  $4,771,267.  It  is  still  paying  retirement  allowances  to  those 
participants  whom  it  required  for  years  to  contribute  to  an  insolvent 
fund,  and  it  must  continue  payments  until  all  those  persons  who  en- 
tered the  fund  prior  to  1895  are  dead,  an  obligation  that  will  not  be 
fulfilled  until  about  the  year  1945. 

In  order  to  give  concrete  examples  of  the  prevailing  inconsistencies 
with  reference  to  the  different  provisions  contained  in  the  different  pen- 
sion funds  there  is  presented  here  a  summary  of  such  provisions : 

80 


HISTORY  OF  PENSIONS 

Provisions  on  Revenues 

In  regard  to  provisions  on  revenues,  it  was  found  that  most  funds 
called  for  contributions  from  the  employes  as  well  as  from  the  cities  or 
states.  The  sources  of  revenue  from  which  the  cities  or  states  derived 
their  income  for  coptributions  are  of  a  mixed  character.  The  cities' 
contributions  toward  police  and  fire  funds  were  obtained  from  dog 
licenses,  liquor  licenses,  fines  on  participants  for  violation  of  some  de- 
partmental rules,  forfeitures  of  wages  in  cases  of  illness,  witness  fees, 
forfeited  bail,  moneys  derived  from  benefit  dances  and  bazaars,  per- 
centages of  police  and  fire  permits,  percentages  of  sales  of  condemned 
or  unclaimed  properties,  percentages  of  license  fees  paid  by  pawn- 
brokers, second-hand  dealers,  junk  dealers,  billiard  hall  owners,  per- 
centages of  the  license  tax  on  insurance  companies,  percentages  of 
premiums  collected  by  foreign  insurance  -companies,  percentages  of 
theater  licenses,  percentages  on  dance  hall  permits,  percentages  of  the 
income  tax,  rewards,  gifts,  and  so  forth. 

All  such  sources  of  revenue  amount  to  indirect  taxation.  The  sums 
derived  each  year  were  found  to  be  different  each  year.  They  are  un- 
reliable and  of  a  constantly  fluctuating  character.  Participants  in  the 
older  funds  have  grown  to  realize  that.  Where  such  funds  proved  in- 
sufficient to  meet  the  needs  of  the  fund  political  pressure  was  exer- 
cised, with  the  result  that  cities  and  states  enacted  amendments  pro- 
viding for  guarantees  to  make  up  discrepancies.  When  cities  and 
states  obligated  themselves  to  that  extent,  they  did  not  realize  that  the 
discrepancies  would  also  increase  yearly  and  that  they  were  imposing 
higher  and  higher  taxes  upon  all  citizens  each  year. 

Inconsistency  of  Benefits 

Just  as  there  was  a  multiplicity  of  sources  of  revenue,  so  there  also 
was  found  a  multiplicity  of  provisions  relating  to  such  fundamentals  as 
management,  amounts  of  contributions  from  employes,  amounts  of 
pension  allowance,  ages  of  retirement,  years  of  service  required  for 
eligibility  to  pensions,  benefits  in  event  of  sickness,  accident,  resigna- 
tion, or  death.  The  only  uniformity  found  was  the  unsoundness  of  the 
funds ;  the  only  consistency,  inconsistency. 

In  a  generalization  on  management  it  was  found  that  the  tendency 
was  to  give  employes  representation.  In  many  of  the  funds  the  em- 
ployes have  a  majority  on  the  managing  boards. 

Amounts  of  contributions  by  employes  in  the  police  and  fire  funds 
vary  from  nothing  to  2^  per  cent  of  salary;  by  teachers,  flat  sums, 
ranging  from  $6  to  $50  a  year. 

Pension  allowances  vary  from  flat  sums  averaging  from  $300  a 
year  to  $1,000,  and  from  25  per  cent  of  final  salary  to  75  per  cent. 

81 


HISTORY  OF  PENSIONS  , 

In  most  cases  in  the  police  and  fire  funds  the  amount  of  pension 
is  set  at  50  per  cent  of  salary.  In  the  teachers'  funds  it  is  usually  a  flat 
sum  ranging  from  $300  to  $800  a  year. 

Ages  of  retirement  range  all  the  way  from  41  years  to  65  years  in 
the  police  and  fire  services.  In  the  teaching  and  municipal  services  it 
ranges  from  45  to  70  years.  In  a  great  number  of  funds  no  age  of  re- 
tirement is  specified  at  all.  In  such  cases  the  number  of  years  of  service 
is  the  qualification  for  pension. 

Years  of  service  in  the  police  and  fire  departments  for  pension 
qualification  range  from  15  to  25  years;  for  teachers,  from  20  to  35 
years. 

Allowances  for  disability  benefits  are  so  complex  and  so  variable 
that  it  is  impossible  to  make  accurate  statements,  except  to  say  that  in 
the  case  of  widows'  pensions,  the  benefits  range  from  about  $20  to  $50 
a  month.  Only  a  very  few  schemes  provide  for  refunds  .of  contri- 
butions to  employes  in  event  of  resignation  or  dismissal. 

With  such  a  profusion  of  conflicting  provisions  characterizing  the 
prevailing  schemes,  it  should  readily  be  apparent  that  a  brief  history 
of  a  typical  example  of  the  history  and  development  of  one  of  the  pre- 
vailing plans  will  suffice  for  all.  For  this  reason  the  New  York  police 
pension  scheme  is  cited;  also  because  it  is  the  oldest  pension  scheme 
in  existence  in  this  country. 

A  Typical  Example 

When  the  New  York  policemen  realized  that  their  makeshift  was 
not  meeting  its  expenses  with  contributions  from  participants  and  rev- 
enues from  the  various  sources  designated,  more  and  greater  demands 
were  made  upon  the  government.  Almost  every  year  amendments  were 
added  that  supplied  additional  revenues.  All  in  all  there  were  about 
forty-six  amendments  made  to  the  police  pension  scheme,  nearly  all  of 
which  provided  more  money  for  the  insolvent  fund.  Mandatory  pro- 
visions requiring  the  city  to  meet  deficiencies  were  passed  in  1892. 
Since  1914  annual  deficiencies  have  been  covered  by  means  of  direct 
budgetary  appropriations  and  the  issue  of  special  revenue  bonds.  The 
first  commission  to  make  a  study  of  conditions  reported  in  1913  that 
there  was  a  deficiency  of  $68,000,000  in  the  police  fund,  $31,500,000  in 
the  fire  fund  and  $55,000,000  in  the  teachers'  fund. 

The  police  fund  began  with  a  "cash  balance"  of  $423.10  the  first 
year  of  its  existence.  That  "balance"  increased  for  24  years  until  it 
reached  $332,701.58.  Then  the  "balance" — due  to  the  liberalization  of 
the  provisions,  to  include,  in  1867,  disability  not  incurred  in  the  per- 
formance of  duty ;  to  include,  in  1877,  retirement  on  application  after 
20  years  of  service  without  proof  of  incapacity;  to  include,  in  1864, 

82 


HISTORY  OF  PENSIONS 

small  benefits  to  the  widows  and  children — began  to  recede  until  at 
the  end  of  32  years  of  experimentation  there  was  no  money  in  the  fund. 
The  reports  then  showed  a  deficit  of  $2,365.28.  At  the  present  time  the 
city  pays  more  than  85  per  cent  of  the  pension  payments  and  that  sum 
represents  in  excess  of  20  per  cent  of  the  payroll. 

Similar  conditions,  though  not  so  appalling,  were  found  by  the 
commissions  appointed  in  Illinois,  Massachusetts,  Pennsylvania,  New 
Jersey,  Connecticut,  Vermont,  California  and  Ohio,  and  if  other  states 
appoint  commissions  there  is  no  doubt  that  they  will  make  the  same 
revelations. 

PENSIONS  FOR  TEACHERS 

Naturally,  the  inclusion  of  provisions  which  did  not  arise  directly 
out  of  the  hazardous  occupations  of  policemen  and  firemen  established 
precedents  for  the  enactment  of  pensions  for  other  public  employes,  of 
which  the  teachers  were  the  first  to  take  advantage.  As  stated  before, 
the  first  scheme  for  teachers  was  stablished  in  New  York  in  1894. 

At  first  teachers  formed  the  usual  mutual  aid  societies  which  paid 
benefits  in  cases  of  sickness  and  provided  funeral  expenses.  No  regu- 
lar contributions  were  required.  Assessments  were  made  whenever 
the  money  was  necessary.  It  did  not  take  long  before  the  teachers 
realized  that  such  arrangements  were  entirely  inadequate.  Regular 
assessments  were  soon  imposed  and,  when  they  did  not  suffice,  revenues 
were  sought  from  various  sources,  and  when  they  again  did  not  suf- 
fice the  legislatures  were  appealed  to  with  the  usual  good  results. 
Teachers'  schemes  show  the  same  inconsistency  of  principle  and  lack 
of  standardization  that  the  police  and  fire  pension  schemes  show,  the 
same  multiplicity  of  different  provisions,  the  same  inequities  of  bene- 
fits, the  same  differences  of  contributions  required,  the  same  ranges  of 
retirement  ages,  and  the  same  ranges  of  qualifications  for  years  of 
service  retirement. 

Commissions  of  Same  Mind 

More  commissions  have  studied  the  pension  situation  as  it  ap- 
plies to  teachers  than  as  it  applies  to  other  public  services.  All  of 
them — Massachusetts,  New  York,  Illinois,  New  Jersey,  Pennsylvania, 
Ohio,  Connecticut,  Vermont,  Maryland,  and  California — have  come  to 
the  same  conclusion  and  have  proved  convincingly  that  a  pension  sys- 
tem is  neither  sound  nor  secure  unless  it  is  in  a  position  to  meet  its 
obligations  to  all  participants  when  they  become  eligible  for  pension 
benefits.  All  these  commissions  reported  that  either  the  pension  sys- 
tems in  their  respectives  states  were  bankrupt  or  were  on  the  verge  of 
insolvency,  and  that  all  of  them  were  facing  deficits. 

83 


HISTORY   OF  PENSIONS 

Turning  to  pension  schemes  for  public  employes  other  than  police- 
men, firemen,  or  teachers,  it  was  found  that  such  laws  were  enacted 
under  pressure  of  the  better-organized  departments.  The  first  of  such 
general  municipal  pension  schemes  was  established  for  the  employes 
of  the  Board  of  Health  of  New  York  City  in  1894.  Only  a  few  cities 
thus  far  have  followed  the  precedent  of  New  York  City  and  have  en- 
acted laws  for  the  benefit  of  their  general  municipal  employes.  Records 
available  show  that  only  the  cities  of  New  York,  Chicago,  Boston, 
Philadelphia,  Pittsburg,  Jersey  City,  Cleveland,  Oakland,  Omaha,  and 
Atlanta  have  such  pension  schemes.  Their  history  is  practically 
identical  with  that  of  the  development  of  .the  police,  fire,  and  teachers' 
plans. 

While  the  most  recent  laws  recommended  by  the  commissions 
which  were  appointed  to  study  the  problem  were  not  in  all  cases  en- 
acted as  presented,  due  to  compromises  that  were  made  and  due  to 
concessions  that  were  made  in  order  to  expedite  legislation,  all  of  them 
nevertheless  represent  distinct  steps  of  advancement.  All  of  them  pro- 
vide for  the  first  essential  necessary  for  a  sound  pension  system,  and 
that  is  provision  for  an  adequate  reserve  to  meet  obligations  for  all 
time.  The  two  most  recently  enacted  laws  of  this  kind  were  put  into 
operation  only  within  the  last  four  months  by  the  city  and  state  of 
New  York.  The  New  York  City  legislation  applies  to  general  mu- 
nicipal employes  and  the  New  York  state  legislation  applies  to  civil 
service  employes. 

Unanimity  in  Reports 

In  conclusion  it  might  be  of  interest  to  present  a  summary  of  the 
unanimous  findings  and  conclusions  of  the  different  expert  commis- 
sions which  have  made  reports  in  the  past  five  years.  Such  unanimous 
and  paramount  conclusions  may  be  stated  as  follows : 

1.  Radical  revision  of  nearly  all  pension  schemes  necessary  be- 
cause nearly  all  of  them  were  established  without  the  knowledge  of  the 
ultimate  costs  and  therefore  have  either  encountered  deficiencies  or 
soon  will  meet  them.     Recommendation:     Establishment  of  a  system 
on  reserve  basis. 

2.  Practice  of  obtaining  revenues   from  indirect  sources  con- 
demned because  cost  of  provisions  are  thereby  disguised  without  tax- 
payers realizing  the  extent  of  city's  support.     Recommendation :     Ap- 
propriation of  specified  sums  each  year  to  be  calculated  by  an  actuary. 
Money  to  be  raised  by  direct  taxation.     Costs  to  be  divided  between 
government  and  participants. 

3.  Practice  of  placing  contribution  of  employe  on  a  "flat"  basis 
termed  inequitable.     Recommendation:   Contributions  should  be  made 
on  percentage  basis  of  salary. 


HISTORY  OF  PENSIONS 

It  was  on  the  incorporation  of  these  three  fundamental  principles 
that  the  various  commissions  experienced  their  hardest  fights.  All  the 
commissions  found  that  the  prevailing  pension  schemes  had  a  number 
of  vociferous  champions,  and  in  nearly  every  instance,  it  was  on  the 
establishment  of  a  reserve  for  the  fund  that  the  disagreement  waxed 
most  acrimonious. 

The  champions  of  the  old  schemes  would  not  admit  that  their  funds 
were  even  facing  deficiencies.  They  pointed  proudly  to  their  books 
and  put  their  fingers  on  their  "cash  balances."  They  failed  to  realize 
that  their  "surplus"  was  merely  the  difference  between  the  year's  re- 
ceipts and  the  year's  disbursements,  that  their  figures  considered  every 
contributor  an  asset  instead  of  a  future  liability  which  they  were  not 
providing  for.  They  failed  to  recognize  the  fact  that  they  were  not 
putting  aside  money  each  year  to  let  it  accumulate  to  the  time  when  de- 
mand would  be  made  for  it,  for  when  they  spoke  of  liabilities  they  had 
in  mind  only  their  liabilities  toward  their  annuitants.  They  therefore 
were  working  under  the  delusion  that  they  were  already  meeting  their 
heaviest  liabilities.  They  did  not  realize  that  the  -liabilities  would  keep 
on  increasing  for  forty  or  fifty  years  and  that  not  until  such  a  period 
had  elapsed  would  the  liabilities  have  reached  their  maximum.  They 
did  not  realize  that  the  money  to  pay  the  accruing  liabilities  must  be 
provided  each  year  during  the  service  of  the  employe,  that  they  must 
be  credited  when  paid  and  then  left  to  accumulate,  together  with  inter- 
est to  the  time  when  the  employe  would  be  eligible  for  a  pension.  They 
did  not  realize  that  their  method  of  financing,  or  any  other  method  that 
does  not  provide  for  a  reserve,  is  parallel  to  the  issuance  of  bonds  with- 
out making  provisions  for  their  retirement 

The  entire  experience  of  the  prevailing  pension  schemes  proves 
that  during  the  early  period  of  operation  only  a  small  part  of  the  lia- 
bility matures.  Each  new  year  another  portion  of  the  liabilities  be- 
comes due  for  payment  or  is  added  to  the  liabilities  already  outstand- 
ing. As  the  amount  of  pension  payments  added  each  year  is  bound  to 
exceed  the  amount  liquidated  through  death  among  pensioners  for  some 
fifty  or  more  years,  so  the  pension  disbursements  grow  steadily  until 
the  bulk  of  liabilities  mature  about  fifty  years  after  the  establishment 
of  the  fund. 

Though  this  picture  of  the  past  has  a  gloomy  aspect,  the  remark- 
able progress  made  in  the  development  of  sound  pension  principles  in 
the  last  few  years,  through  the  influence  of  the  special  commissions  that 
have  been  appointed,  has  been  so  enlightening  it  is  impossible  to  be- 
lieve that  the  mistakes  of  the  past  will  be  perpetuated  by  legislators  of 
the  present  or  the  future.  A  more  serious  study  of  the  problem  by  our 

85 


HISTORY  OF  PENSIONS 

law  makers  will  clear  the  track  for  the  establishment  of  pension  sys- 
tems on  sound  financial,  economic,  and  social  principles  everywhere. 

EXPERIENCE  IN  OTHER  COUNTRIES 

Pension  schemes  in  foreign  countries  originated  with  the  general 
conception  that  some  individuals  or  some  group  of  employes  were  en- 
titled to  special  favors  or  awards  from  the  government  for  the  perform- 
ance of  some  distinguished  service. 

The  first  records  of  pensions  indicate  that  pensions  were  awarded 
to  individuals  as  early  as  the  Roman  era.  Such  pensions  took  the  form 
of  rewards  for  'special  court  favorites.  The  first  group  pensions  were 
awarded  to  persons  engaged  in  military  or  naval  services.  Next  they 
began  to  include  persons  who  rendered  distinguished  services  in  the 
realm  of  art,  science,  and  literature.  Then  they  included  public  servants 
who  were  engaged  in  everyday  hazardous  services,  such  as  policemen 
and  firemen.  Liberalization  of  pension  provisions  soon  set  precedents 
which  resulted  in  the  establishment  of  makeshifts  for  the  other  branches 
of  public  service. 

Gradually  the  idea  spread  that  pensions  were  not  to  be  considered 
as  rewards,  but  rather  as  a  right  of  employes  in  both  public  and  pri- 
vate occupations.  That  is  the  reason  governments  began  to  regard  pen- 
sions as  a  responsibility  that  ought  to  be  assumed  by  society  toward 
employes  who  gave  them  a  lifetime  of  service,  and  that  is  the  reason 
that  the  governments  alone  provided  for  the  costs  of  maintaining  the 
projects  that  were  established. 

Europe's  experience  with  its  early  makeshift  schemes  were  just 
as  disastrous  as  the  early  experience  of  the  United  States.  Europe, 
of  course,  had  the  first  experience.  The  United  States  suffered  from 
the  makeshifts  only  because  the  schemes  that  were  established  here  un- 
wittingly or  otherwise,  incorporated  most  of  the  fallacies  and*erroneous 
principles  which  caused  the  distress  with  pensions  in  Europe.  Had  the 
framers  of  the  pension  schemes  in  this  country  profited  from  the  mis- 
takes of  the  experiences  in  the  older  countries,  we  would  not  today 
have  such  an  innumerable  number  of  projects  that  must  be  revised  in 
order  to  be  sound  and  in  order  that  the  contributions  of  employes  may 
be  safe. 

Pensions  Deferred  Pay 

Just  as  legislators  in  the  United  States  began  to  demand  that  em- 
ployes contribute  toward  the  funds,  so  European  governments  long  be- 
fore enacted  provisions  compelling  participants  in  funds  to  contribute. 
Participants  in  European  funds  met  with  deficiencies  just  as  afterward 
participants  in  this  country  came  face  to  face  with  deficiencies  and, 
as  their  contributions  were  increased  to  meet  the  ever-mounting  costs, 

86 


HISTORY  OF  PENSIONS 

participants  soon  began  to  regard  pensions  as  deferred  pay.  That  is 
exactly  what  American  participants  will  consider  them  if  some  do  not 
already  Consider  them  so.  Even  though  in  some  European  countries 
participants  do  not  make  actual  contributions,  they  regard  their  par- 
ticipation in  such  funds  as  entailing  actual  contributions  by  virtue  of 
the  fact  that  their  salaries  are  lower  than  those  paid  for  the  same 
service  in  private  occupations. 

Out  of  those  facts  there  developed  a  world-consciousness  which 
produced  a  feeling  of  social  responsibility  for  those  persons  who  be- 
come disabled  through  sickness  or  accident  or  incapacitated  through 
age.  This  social  philosophy  was  made  stronger  by  the  idealism  that 
was  awakened  throughout  the  civilized  world  by  the  late  war.  Today 
social  justice  holds  that  the  old  idea  that  pensions  are  an  award  is  not 
tenable,  and  that  pensions  should  be  made  and  should  be  regarded  as 
an  inherent  right  of  every  employe. 

Pension  schemes  have  been  in  operation  for  more  than  a  century. 
France  established  a  pension  system  for  municipal  employes  before 
the  year  1800;  Austria-Hungary  established  a  pension  system  for  sev- 
eral groups  of  employes  as  far  back  as  1760.  Naturally  in  those  coun- 
tries, as  well  as  in  England  and  Germany,  many  schemes  have  been 
abandoned  and  many  new  ones  have  been  developed.  To  this  day, 
however,  there  are  very  few  systems  in  those  countries  that  can  serve 
as  models.  For  this  reason  it  would  be  merely  a  duplication  of  the 
findings  of  the  other  commissions  if  there  were  included  herein  a  sur- 
vey of  individual  experiences  of  other  countries.  We  refer  the  inter- 
ested reader  for  such  a  survey  to  the  reports  issued  by  the  Illinois  Com- 
mission in  1916  and  the  Massachusetts  Commission  in  1910.  Though 
pension  legislation  in  this  countiy  is  generally  of  an  unsound  character, 
recent  legislation  in  this  country  is  far  better  than  that  recently  en- 
acted in  Europe,  and  therefore  serves  as  a  better  model. 

We  will  refer  here  only  to  the  recently  enacted  pension  systems  in 
other  countries,  and  we  will  mention  only  such  general  facts  as  the  re- 
port of  the  Illinois  Commission  does  not  contain. 

As  an  illustration  that  the  pension  legislation  of  the  older  coun- 
tries should  not  serve  as  a  model,  we  mention  here  the  costs  of  some 
of  the  prevailing  projects.  The  latest  reports  issued  by  European 
countries  just  previous  to  the  war  show  that  the  pension  systems  for 
civil  service  employes  in  France  had  reached  26  per  cent  of  the  pay- 
roll ;  Paris  police,  34  per  cent  of  the  payroll ;  London  police,  32  per  cent 
of  the  payroll ;  British  civil  service,  31  per  cent  of  the  payroll ;  Berlin 
municipal  service,  42  per  cent  of  the  payroll ;  Austrian  civil  service,  40 
per  cent  of  the  payroll. 

Among  the  countries  to  enact  pension  legislation  recently  are  Eng- 

87 


HISTORY  OF  PENSIONS 

land,  Italy,  Spain,  and  Uruguay.  With  the  exception  of  the  system 
established  for  teachers  in  England,  they  are  all  based  on  a  contribu- 
tory basis. 

England 

In  1918  the  urgent  need  of  securing  men  and  women  to  promote 
the  development  of  education  prompted  the  government  to  introduce 
a  pension  system  for  all  grade  teachers  in  institutions  below  university 
rank.  The  government  assume^  responsibility  for  paying  old  age  and 
disability  pensions  to  teachers  in  schools  aided  by  state  grants.  Teach- 
ers became  eligible  for  superannuation  allowances  at  the  age  of  sixty 
and  after  30  years  of  service.  The  amount  of  superannuation  allow- 
ance is  one-eightieth  of  average  salary  for  each  year  of  service  or  one- 
half  of  average  salary,  whichever  is  the  lesser.  In  addition  a  gratuity 
is  given  in  one  sum  of  one-thirtieth  of  average  salary  for  each  year  of 
service.  Disability  allowances  are  paid  at  the  rate  of  one-twelfth  of 
average  salary  for  each  year  of  service  after  ten  years  of  service. 
Death  benefits  amounting  to  one  year's  salary  will  be  paid  if  the  teacher 
has  served  five  years. 

This  non-contributory  system  departs  from  the  generally  accepted 
contributory  systems  in  vogue  and  is  due  to  the  influence  of  Mr. 
Herbert  Fisher,  president  of  the  Board  of  Education.  It  is  estimated 
that  the  total  cost  of  the  plan  will  reach  $12,500,000  in  ten  years  and 
then  continue  to  increase  in  big  sums.  British  critics  of  the  plan  point 
out  that  it  is  unsound  and  entirely  too  costly  to  be  maintained  for  any 
length  of  time.  That  this  plan  was  hurriedly  planned  to  meet  an 
emergency  is  made  evident  by  the  recent  report  issued  by  the  De- 
partmental Committee  on  the  Superannuation  of  Teachers  in  Secondary 
Schools  and  the  report  of  the  Sub-committee  of  the  Executive  Com- 
mittee of  King  Edward's  Hospital  Fund  for  London.  Both  those  re- 
ports indirectly  condemn  the  Fisher  scheme  and  emphatically  favor 
the  contributory  systems. 

Italy 

Compulsory  old  age  and  invalidity  insurance  for  practically  all 
manual  laborers,  salaried  employes,  and  professional  classes  was  en- 
acted in  1919.  It  took  the  place  of  the  non-contributory  systems  in 
vogue.  The  age  of  retirement  is  set  at  65  years.  The  cost  of  the  sys- 
tem is  maintained  by  equal  contributions  from  the  employes  and  em- 
ployers with  a  guaranteed  subsidy  by  the  government.  Pension  allow- 
ances are  measured  by  the  accumulation  to  the  credit  of  each  partici- 
pant. Such  amounts  can  be  increased  "by  voluntary  increase  of  contri- 
butions during  the  service  of  an  employe. 


HISTORY  OF  PENSIONS 

Spain 

Provisions  for  deferred  life  annuities  were  enacted  in  1908  on  a 
contributory  basis.  This  act  was  supplemented  in  1919  by  a  compulsory 
old-age  insurance  law  for  all  wage-earners  from  16  to  65  years  of  age 
whose  total  income  is  below  $800.  The  deferred  life  annuities  act  is 
voluntary. 

Uruguay 

An  old  age  pension  law  was  enacted  in  1919  providing  a  small  pen- 
sion for  all  employes  who  reach  the  age  of  sixty.  It  is  semi-contribu- 
tory in  character,  the  employer  making  most  of  the  contributions  for  its 
employes. 

Note — The  information,  presented  in  this 'chapter  was  collected  from  official  sources. 
All  the  books,  pamphlets,  and  reports  containing-  material  were  obtained  for  the  Pension 
Laws  Commission  by  Mr.  Ovid  B.  Blix,  Milwaukee  Municipal  Reference  Librarian,  whose 
graciousness  and  co-operative  spirit  are  gratefully  acknowledged. 


89 


CHAPTER  VII 


INVESTIGATION    OF    THE    OPERATION    OF    EXISTING 
PENSION   SYSTEMS   IN   THE   CITY 


There  are  three  public  pension  systems  in  operation  in  the  city 
at  the  present  time,  namely : 

Policemen's  Pension  Fund 

Firemen's  Pension  Fund 

Public  School  Teachers'  Annuity  and  Retirement  Fund. 

Results  of  the  investigation  made  in  each  of  these  cases  are  given 
in  this  chapter.  ». 

The  data  was  assembled  as  of  January  1,  1920,  and  all  calcula- 
tions were  made  as  of  that  date.  • 

In  Table  I,  page  95,  in  the  case  of  the  policemen ;  Table  II,  page 
96,  in  the  case  of  the  firemen ;  and  Table  III,  page  97,  in  the  case  of 
the  public  school  teachers,  is  given  the  expected  cost  of  pensions  dur- 
ing each  year,  for  a  period  of  50  years  from  January  1,  1920,  under  a 
continued  operation  of  the  fund.  After  50  years,  the  payments  may  be 
expected  to  run  comparatively  uniformly  from  year  to  year  and  to  be 
those  scheduled  for  the  50th  year.  Tables  IV,  V,  and  VI  each  contain 
a  statement  of  the  actual  operation  of  the  fund  in  question  for  each  of 
the  last  five  fiscal  years  of  operation. 

Increases  in  Pension  Payments  during  Forty-two  Years 

A  study  of  Table  I  discloses  that  the  payments  from  the  police- 
men's fund  will  run  from  6.1  per  cent  of  the  payroll  in  the  year  1920 
to  29.7  per  cent  of  the  payroll  in  and  after  the  year  1962. 

A  study  of  Table  II  discloses  that  the  payment  from  the  firemen's 
fund  will  run  from  10.1  per  cent  of  the  payroll  in  the  year  1920  to  34.1 
per  cent  of  the  payroll  in  and  after  the  year  1962. 

A  study  of  Table  III  discloses  that  the  payments  from  the  Public 
School  Teachers'  fund  will  run  from  1.3  per  cent  of  the  payroll  in  the 
year  1920  to  6.8  per  cent  of  the  payroll  in  the  year  1962. 

These  percentages  in  each  case  have  been  determined  by  actual 
computations  based  on  the  experience  of  the  fund  as  to  ages  at  en- 
trance and  rates  of  resignation,  dismissal  and  death  for  the  last  ten 
years  of  operation  of  the  fund. 

Level  Yearly  Payments  required  until  the  year  1962 

Policemen's  Fund 

The  pension  payments  per  year  as  given  in  Table  I,  page  95,  would 
require  a  sum  on  hand  on  January  1,  1922  of  $3,382,748,  as  tabulated 
hereafter,  in  order  to  pay  pensions  to  policemen  and  their  dependents 

90 


COST   OF   EXISTING  SYSTEMS 

for  40  years  from  such  date  or  until  the  year  1962,  if  the  rate  of  inter- 
est be  assumed  as  4  per  cent  per  annum.  That  is,  if  the  sum  of 
$3,382,748,  were  in  the  treasury  on  January  1,  1922,  and  no  further 
payments  were  received  into  the  funds,  other  than  interest  payments, 
there  would  be  on  hand  an  amount  sufficient  to  pay  all  pensions  pay- 
able from  this  fund  until  the  year  1962,  it  being  assumed  that  all  bal- 
ances in  the  treasury  will  earn  interest  at  the  rate  of  4  per  cent  per 
annum. 

Toward  providing  this  sum,  employes  will  contribute  yearly 
amounts  equivalent  to  an  amount  on  hand  on  January  1,  1922  of 
$519,739,  and  the  sum  in  the  treasury  on  such  date  will  be  approxi- 
mately $225,000,  making  a  total  of  $744,749. 

There  will  therefore  need  to  be  provided  from  sources  other  than 
contributions  of  employes,  amounts  equal  to  $3,382,748,  less  $744,739, 
or  $2,638,009,  on  hand  January  1,  1922,  if  pensions  are  to  be  paid  as 
under  the  present  plan  until  the  year  1962,  assuming  interest  at  the  rate 
of  4  per  cent  per  annum. 

This  is  equivalent  to  equal  yearly  payments  throughout  this  period 
of  $133,281,  per  year  or  12.7  per  cent  of  the  payroll  as  of  January  1, 
1920.  On  and  after  the  year  1962,  the  annual  payments  required,  out- 
side of  contributions  of  the  employes,  will  be  27.2  per  cent  of  the 
payroll. 

TABULATION   OF   RESULTS 

Equivalent,  on  January  1,  1922,  of  amounts  necessary  to  pay  pensions 

to  those  on  the  pension  rolls  on  January  1,  1920,  until  the  year  1962.  .$  700,095 

Equivalent,  on  January  1,  1922,  of  amounts  necessary  to  pay  pensions 

to  those  in  service  on  January  1,  1920,  until  the  year  1962 2,401,427 

Equivalent,  on  January  1,  1922,  of  amounts  necessary  to  pay  pensions 
to  those  entering  the  service  after  January  1,  1920,  until  the  year  1962  281,226 

Total $3,382,748 

Equivalent,  on  January  1,  1922,  of  amounts  to  be  contributed  by  em- 
ployes until  the  year  1962 $  519,739 

Estimated  sum  in  treasury,  January  1,  1922 225,000 

Total .......$   744,739 

Balance — Amount  to  he  provided  from  sources  outside  contributions 
of  employes,  if  pensions  are  to  be  paid  until  the  year  1962 $2,638,009 

Firemen's  Fund 

The  pension  payments  per  year,  as  given  in  Table  II,  page  96, 
would  require  a  sum  on  hand  on  January  1,  1922,  of  $4,591,490,  as 
tabulated  hereafter,  in  order  to  pay  pensions  to  firemen  and  their  de- 
pendents for  40  years  from  such  date,  or  until  the  year  1962,  if  the 
rate  of  interest  assumed  be  4  per  cent  per  annum.  That  is,  if  the  sum 
of  $4,591,490,  were  in  the  treasury  on  January  1,  1922,  and  no  further 
payments  were  received  into  the  fund,  other  than  interest  payments, 
there  would  be  on  hand  an  amount  sufficient  to  pay  all  pension's  pay- 

91 


COST    OF    EXISTING   SYSTEMS 

able  from  this  fund  until  the  year  1962,  it  being  assumed  that  all  bal- 
ances in  the  treasury  will  earn  interest  at  the  rate  of  4  per  cent  per 
annum. 

Toward  providing  this  sum,  employes  will  contribute  yearly 
amounts  equivalent  to  an  amount  on  hand  on  January  1,  1922  of 
$489,555,  and  the  sum  in  the  treasury  on  such  date  will  be  approxi- 
mately $225,000,  making  a  total  of  $714,555. 

There  will  therefore  need  to  be  provided,  from  sources  other  than 
contributions  of  employes,  amounts  equal  to  $4,591,490,  less  $714,555, 
or  $3,876,935,  on  hand  January  1,  1922,  if  pensions  are  to  be  paid  as 
under  the  present  plan  until  the  year  1962,  assuming  interest  at  the 
rate  of  4  per  cent  per  annum. 

This  is  equivalent  to  equal  yearly  payments  throughout  this  period 
of  $195,876  per  year,  or  19.8  per  cent  of  the  payroll  as  of  January  1, 
1920.  On  and  after  the  year  1962,  the  annual  payments  required,  out- 
side of  contributions  of  the  employes,  will  be  31.6  per  cent  of  the 
payroll. 

TABULATION    OF    RESULTS 

Equivalent,  on  January  1,  1922,  of  amounts  necessary  to  pay  pensions  to 

those  on  the  pension  rolls  January  1,  1920,  until  the  year  1962 $1,033,331 

Equivalent,  on  January  1,  1920,  of  amounts  necessary  to  pay  pensions  to 
those  in  service  on  January  1,  1920,  until  the  year  1962 2,917,372 

Equivalent,  on  January  1,  1922,  of  amounts  necessary  to  pay  pensions  to 
those  entering  the  service  after  January  1,  1920,  until  the  year  1962. .  640,787 


Total $4,591,490 

Equivalent,  on  January  1,  1922,  of  amounts  to  be  contributed  by  em- 
ployes until  the  year  1962 489,555 

Estimated  sum  in  treasury  January  1,  1922 225,000 

Total $   714,555 

Balance — Amount  to  be  provided  from  sources  outside  contributions  of 
employes,  if  pensions  are  to  be  paid  until  the  year  1962 $3,876,935 

Public  School  Teachers'  Fund 

The  pension  payments  per  year,  as  given  in  Table  III,  page  97, 
would  require  a  sum  on  hand  on  January  1,  1922,  of  $2,188,173,  as 
tabulated  hereafter,  in  order  to  pay  pensions  to  public  school  teachers 
for  40  years  from  such  date  or  until  the  year  1962,  if  the  rate  of  in- 
terest assumed  be  4  per  cent  per  annum.  That  is,  if  the  sum  of 
$2,188,173,  were  in  the  treasury  on  January  1,  1922,  and  no  further 
payments  were  received  into  the  funds  other  than  interest  payments, 
there  would  be  on  hand  an  amount  sufficient  to  pay  all  pensions  pay- 
able from  this  fund  until  the  year  1962,  it  being  assumed  that  all  bal- 
ances in  the  treasury  will  earn  interest  at  the  rate  of  4  per  cent  per 
annum. 

Toward  providing  this  sum,  employes  will  contribute  yearly 
amounts  equivalent  to  an  amount  on  hand  on  January  1,  1922,  of 

92 


COST   OF   EXISTING   SYSTEMS 

$801,608,  and  the  sum  in  the  treasury  on  such  date  will  be  approxi- 
mately $340,000,  making  a  total  of  $1,141,608. 

There  will  therefore  need  to  be  provided,  from  sources  other  than 
contributions  of  employes,  amounts  equal  to  $2,188,173,  less  $1,141,608, 
or  $1,046,565,  on  hand  January  1,  1922  if  pensions  are  to  be  paid  as 
under  the  present  plan  until  the  year  1962,  assuming  interest  at  the 
rate  of  4  per  cent  per  annum. 

This  is  equivalent  to  equal  yearly  payments  throughout  this  period 
of  $52,876  per  year,  or  2.2  per  cent  of  the  payroll  as  of  January  1, 
1920.  On  and  after  the  year  1962  the  annual  payments  required  out- 
side of  contributions  from  employes,  will  be  5.2  per  cent  of  the  payroll. 

TABULATION   OF   RESULTS 

Equivalent,  on  January  1,  1922,  of  amounts  necessary  to  pay  pensions  to 
those  on  the  pension  rolls  January  1,  1920,  until  the  year  1962 $  135,468 

Equivalent,  on  January  1,  1922,  of  amounis  necessary  to  pay  pensions  to 
those  in  service  on  January  1,  1920,  until  the  year  1962 1,924,527 

Equivalent,  on  January  1,  1922,  of  amounts  necessary  to  pay  pensions  to 
those  entering  the  service  after  January  1,  1920,  until  the  year  1962. .  128,178 

Total .'.$2,188,173 

Equivalent,  on  January  1,  1922,  of  amounts  to  be  contributed  by  em- 
ployes until  the  year  1962,.  (Intimated  at  $40,500.00  per  annum) $  801,608 

Estimated  sum  in  treasury  January  1,  1922 340,000 


Total * -.$1,141,608 

Balance — Amount  to  be  provided  from  sources  outside  contributions  of 
employes,  if  pensions  are  to  be  paid  until  the  year  1962 $1,046,565 

Policemen's  Fund  as  Compared  with  Firemen's  Fund 

The  expected  payments  in  the  policemen's  fund  run  low  as  com- 
pared with  those  in  the  firemen's  fund.  This  is  the  usual  experience  in 
such  funds  and  is  accounted  for  in  that  policemen  do  not  retire  on 
pension  at  as  early  an  age  on  the  average  as  do  firemen.  This  is  pos- 
sibly because  there  are  more  positions  available  in  the  police  depart- 
ment, than  in  the  fire  department,  which  an  employe  can  properly  fill 
after  his  physical  vigor  has  begun  to  decline. 

In  the  case  of  the  Milwaukee  funds,  however,  the  difference  is 
greater  than  usual,  a  fact  Which  can  readily  be  accounted  for  in  this 
instance  because  the  policemen  do  not  have  as  strong  a  guarantee  of 
sufficient  income  to  meet  pension  demands  as  do  the  firemen. 

Policemen's   and   Firemen's   Funds   as   Compared   with   Funds   in 

other  Cities 

In  both  funds,  the  expected  payments  run  rather  low  as  compared 
with  those  in  funds  of  other  cities  for  like  services  and  regulated  by 
somewhat  similar  provisions. 
This  is  due  to  twro  causes: 

First.     Although 'a  few  have  retired  on  pension  at  somewhat  early 

93 


COST   OF   EXISTING   SYSTEMS 

ages,  the  ratio  of  the  number  that  have  done  so  to  the  number  in  the 
whole  department  is  smaller  than  is  usual  in  funds  for  like  services 
where  the  systems  are  older. 

Second.  Evidences  of  young  women  marrying  old  employes, 
which  appear  in  some  of  the  older  systems,  have  been  entirely  lacking  in 
these  services. 

The  acts  regulating  both  funds,  however,  provide  a  maximum 
pension,  upon  completion  of  a  definite  number  of  years  of  service, 
namely  22  years,  and  provide  certain  stipulated  pension  payments  per 
month  to  widows  without  reference  to  the  difference  in  ages  as  be- 
tween such  widows  and  their  husbands.  The  history  of  pension  funds 
that  have  been  established  for  a  considerable  number  of  years,  both  in 
this  country  and  foreign  countries,  has  been  that  payments  from  funds 
where  such  provisions  obtain  will  eventually  run  to  something  in  the 
neighborhood  of  40  per  cent  of  the  payroll  . 

There  is  no  reason  to  believe  that  the  experience  of  these  funds 
will  be  different  from  that  of  older  funds  if  these  provisions  are  al- 
lowed to  remain  in  these  acts  without  modification. 

Public  School  Teachers'  Annuity  and  Retirement  Fund 

The  .expected  payments  from  the  Public  School  Teachers'  Annuity 
and  Retirement  Fund  run  somewhat  low  as  compared  with  those  of 
other  public  school  teachers'  funds  operated  under  somewhat  similar 
provisions. 

This  is  due  to  the  fact  that  an  unusually  long  period  of  service, 
namely  35  years,  is  required  for  service  pension  when  teachers  leave 
the  service  before  attainment  of  age  65. 


94 


COST   OF   EXISTING   SYSTEMS 

TABLE  I.     POLICEMEN 

Showing  the  Annual  Pension  Payments  to  Policemen  under  the  present  plan 
and  the  percentages  these  payments  are  to  salaries. 


I 

Year 
i 

'ayments  to 
pensioners 
of   1/1/20 
ind  to  their 
dependents 

Payments  to 
those  in 
service  on 
1/1/20  and 
to  their 
dependents 

Payments  to 
those  who 
enter  service 
after  1/1/20 
and  to  their 
dependents 

Total 
Pension 
Payments 

Ratios  of 
pension 
payments  to 
salaries  In 
percentages 

(Col.   1) 

(Col.    2) 

(Col.   3) 

(Col.  4) 

(Col.   5) 

1920  . 

$55,683 

$     8,562 

$         32 

$  64,277 

6.1 

1921  

53,774 

20,505 

74 

.       74,353 

7.1 

1922 

52,846 

31,778 

128 

84,752 

8.1 

1923  

51,893 

42,049 

194 

94.136 

9.0 

1924  

50,907 

52,591 

290 

103,788 

9.9 

1925  

49,887 

62,270 

414 

112,571 

10.7 

1926  . 

48,830 

71,077 

572 

120,479 

11.5 

1927  

47,741 

79,302 

760 

127,803 

12.2 

1928  

46,612 

87,461 

982 

135,055 

12.9 

1929  

45,449 

95,161 

1,242 

141,852 

13.5 

1930  

44,253 

102,596 

1,538 

148,387 

14.1 

1931  

43,035 

108,396 

1,870 

153,301 

14.6 

1932  

41,790 

113,972 

.      2,242 

158,004 

15.0 

1933  

40,526 

119,444 

2,788 

162,758 

15.5 

1934  

39,249 

124,772 

3,510 

167,531 

16.0 

1935  

37,951 

130,251 

4;418 

172,620 

16.4 

1936  

36,642 

135,751 

5,516 

177,909 

16.9 

1937  

35,325     <* 

141,250 

6,814 

183,389 

17.4 

1938  

33,998 

146,950 

8,314 

189,262 

18.0 

1939  

32,663 

152,639 

10,024 

195,326 

18.6 

1940  

31,316 

158,182 

12,284 

201,782 

19.2 

1941  

29,959 

163,405 

15,160 

208,524 

19.9 

1942  

28,597 

168,453 

18,710 

215,760 

20.5 

1943  

27,227 

173,043 

23,094 

223,364 

21.3 

1944  

25,853 

177,239 

28,436 

231,528 

22.0 

1945  

24,477 

180,775 

34,844 

240,096 

22.9 

1946  . 

23,104 

183,657 

42,432  . 

249,193 

23.7 

1947  

21,730 

185,866 

51,128 

258,724 

24.6 

1948  

20,363 

187,264 

61,006 

268,633 

25.6 

1949  

18,999 

187,972 

72,096 

279,067 

26.6 

1950  

17,647 

187,489 

84,330 

289,466 

27.6 

1951  

16,303 

186,233 

90,897 

293,433 

27.9 

1952  

14,966 

184,121 

98,108 

297,195 

28.3 

1953  

13,617 

181,038 

105,753 

300,408 

28.6 

1954  

12,334 

177,227 

113,816 

303,377 

28.9 

1955  '.. 

11,088 

172,631 

122,291 

306,010 

29.1 

1956  . 

9,373 

167,320 

131,072 

307,765 

29.3 

1957 

7,823 

161,315 

140,106 

309,244 

29.4 

1958  

6,340 

154,734 

149,411 

310,485 

29.6 

1959  

4,974 

147,529 

158,762 

311,265 

29.7 

1960  

3,569 

139,854 

168,087 

311,510 

29.7 

1961  

2,546 

131,823 

177,312 

311,681 

29.7 

1962  

1,836 

123,494 

186,405 

311,735 

29.7 

1963  

1,371 

115,366 

195,317 

312,054 

29.7 

1964  

1,178 

106,366 

204,551 

312,095 

29.7 

1965  . 

912 

97,742 

213,446 

312,100 

29.7 

1966.  , 

757 

89,138 

222,208 

312,103 

29.7 

1967  

638 

80,646 

230,824 

312,108 

29.7 

1968  

529 

72,189 

239,392 

312,110 

29.7 

1969  

434 

64,235 

247,441 

312,110 

29.7 

95 


COST   OF   EXISTING   SYSTEMS 


TABLE   II.     FIREMEN 


Showing  the  Annual 
and  the  percentages  thesi 

Payments  to 
pensioners 
Year                  of  1/1/20 
and  to  their 
dependents 
(Col.  1) 

1920  $86,210 
1921  84,411 
1922  82,794 
1923  81,136 
1924  79,405 
1925  77.624 

Pension  Payments  to  Firemen  under  the 
z  payments  are  of  salaries. 
Payments  to         Payments  to 
those   in                those  who 
service  on           enter  service 
1/1/20  and           after  1/1/20                Total 
to  their              and  to  their              Pension 
dependents           dependents           Payments 
(Col.    2)                  (Col.    3)                  (Col.   4) 

$  13,247           $       103           $  99,560 
26,198                   264             110,873 
36,717                   488             119,999 
47,383                    778             129,297 
57,938                 1,140             138,483 

68,383                 1,586            '147,593 

78,540                 2,121              156,484 
89,010                 2,749              165,696 
99,381                 3,471              174,844 
109,603                 4,339             183,919 
119,253                 5,352             192,447 
128,643  '             6,517             200,811 
138,209                 7,832             209,433 
149,363                 9,296             219,712 
159,482               10,912             229,093 

168,517               12,678             237,509 

176,527               14,592             244,982 
184,488               16,654             252,564 
192,363               18,860             260,072 
199,359               21,209             266,849 
206,035               23,701             273,^84 
211,763               26,654             279,647 
217,535               30,084             286,577 
221,937               34,015             292,071 
225,121               38,468             297,149 

227,428              43,470             301,917 

228,935               49,033             306,512- 
229,290               55,152             310,574 
228,786               61,836             314.441 
227,371               69,076             318,204 
224,873               76,874             321,619 
221,540               85,199             324,736 
217,281               94,025             327,472 
212,240             103,310             329,800 
206,253             112,965             331,740 

199,487             122,951              333,333 

191,983             133,217             334,647 
183,734             143,710             335,641 
174,817             154,371              336,301 
165,176             165,135             336,536 
155,130             175,908             336,546 
145,073             186,664             336,601 
135,076             197,339             336,628 
125,140             207,879             336,683 
115,301              218,224             336.756 

105,682             228,322             336,854 

96,225             238,095             336,869 
87,266             247,449             337,000 
78,884             256,114             337,043 
71,188             264,086             337,085 

present  plan 

Ratios  of 
pension 
payments  to 
salaries  in 
percentages 
(Col.   5) 
10.1 
11.2 
12.1 
13.1 

14.0 
14.9 

15.8 
16.7 
17.7 
18.6 
19.5 
20.3 
21.2 
22.2 
23.2 

24.0 

24.8 
25.5 
26.3 
27.0 
27.6 
28.3 
29.0 
29.5 
30.0 

30.5 

31.0 
31.4 
31.8 
32.2 
32.5 
32.8 
33.1 
33.3 
33.5 

33.7. 

33.8 
33.9 
34.0 
34.0 
34.0- 
34.0 
34.0 
34.0 
34.0 

34.1 

34.1 
34.1 
34.1 
34.1 

1926  . 

75,823 

1927. 
1928  . 
1929  . 
1930  .  . 

73,937 
.  .  ....       71,992 
69,977 
67,842 

1931  . 

65,651 

1932  .  . 
1933  .  , 
1934  .  . 

63,392 
61,053 
58,699 

1935  . 
1936  . 

56,314 

53,863 

1937  .  . 
1938  .  . 

51,422 
48,849 

1939  .  . 

46,281 

1940  .  . 

43,748 

1941  .  . 
1942  .  . 
1943  .  . 
1944  .  . 

41,230 
38,958 
36,119 
33,560 

1945  .  , 

31,019 

1946  . 
1947  .  . 

28,544 
26,132 

1948  .  . 

23,819 

1949  .  . 

21,757 

1950  .  . 

19,872 

1951  .  . 

17,997 

1952  .  . 

16,166 

1953  .  . 

14,250 

1954  .  . 

12  522 

1955  .  . 

10,895 

1956  . 
1957  .  . 

9,447 
.....        8,197 

1958  .  . 

7,113 

1959  .  . 

6,225 

1960  .  . 
1961  .  . 
1962  .  . 

5,508 
4,864 
4,213 

1963  .  . 
1964  .  . 

1965  .  . 

3,664 
3,231 

2850 

1966  . 

2,549 

1967  .  . 
1968.  . 
1969  .  . 

2,285 
2,045 
1,811 

96 


COST  OF  EXISTING  SYSTEMS 

TABLE  III.    TEACHERS 

Showing  the  Annual  Pension  Payments  to  Teachers  under  the  present  plan 
and  the  percentages  these  payments  are  of  salaries. 


Payments  to 

Payments  to 
those  In 

Payments  to 
those  who 

Ratios  of 

pensioners 

service  on 

enter  service 

pension 

Year 

of  1/1/20 

1/1/20  and 

after  1/1/20 

Total 

payments  to 

and  to  their 

to  their 

and  to  their 

Pension 

salaries  in 

dependents 

dependents 

dependents 

Payments 

percentages 

(Col.  1) 

(Col.   2) 

(Col.  3) 

(Col.  4) 

(Col.  6) 

1920. 

$18,095 

$   12,900 

$         104 

$  31,099 

1.3 

1921  

16,588 

21,170 

261 

38,019 

1.5 

1922  

15,957 

28,648 

457 

45,062 

1.8 

1923  

15,308 

36,248 

691 

52,247 

2.1 

1924  

14,640 

43,903 

949 

59,492 

2.4 

1925  

13,531 

51,931 

1,224 

66,686 

2.7 

1926.  , 

12,642 

58,953 

1,508 

73,103 

3.0 

1927 

12,020 

65,998 

1,781 

79,799 

3.2 

1928  

11,174 

72,207 

2,038 

85,419 

3.5 

1929 

10,400 

79,278 

2,283 

91,961 

3.7  ' 

1930  

9,650 

86,242 

2,519 

98,411 

4.0 

1931  

8,795 

91,592 

2,747 

103,134 

4.2 

1932  

,     7,583 

97,520 

2,969 

108,072 

4.4 

1933  

•   6,686 

102,701 

3,189 

112,576 

4.6 

1934  

6,156 

106,417 

3,407 

115,980 

4.7 

1935  

5,521 

109,800 

3,627 

118,948 

4.8 

1936  . 

4,677 

113,268 

3,851 

121,796 

4.9 

1937  

4,147 

115,736 

4,066 

123,949 

5.0 

1938 

3,773 

118,033 

4,310 

126,116 

5.1 

1939  

3,520 

120,229 

4,595 

128,344 

5.2 

1940  

3,267 

122,356 

4,943 

130,566 

5.3 

1941  

2,691 

124,553 

5,335 

132,579 

5.4 

1942  

2,377 

126,374 

5,793 

134,544 

5.4 

1943  

1,872 

128,292 

6,325 

136,489 

5.5 

1944  

1,619 

129,519 

6,934 

138,072 

5.6 

1945  

1,598 

130,373 

7,625 

139,596 

5.6 

1946  . 

1,403 

131,284 

8,402 

141,089 

5.7 

1947 

1,319 

133,113 

9,267 

143,599 

5.8 

1948  

940 

134,986 

10,228 

146,154 

5.9 

1949  

872 

136,563 

11,291 

148,726 

6.0 

1950  

805 

137,760 

12,465 

151,030 

6.1 

1951 

556 

138,559 

13,638 

152,753 

6.2 

1952  

425 

138,832 

14,812 

154,069 

6.2 

1953  .  

368 

139,578 

16,280 

156,226 

6.3 

1954  

206 

139,836 

18,060 

158,102 

6.4 

1955  

100 

139,595 

20,153 

159,848 

6.5 

1956  . 

138,602 

22,561 

161,163 

6.5 

1957  .  .  . 

137,037 

25,282 

162,319 

6.6 

1958  .  .  . 

134,966 

28,404 

163,370 

6.6 

1959  .  .  . 

132,444 

31,907 

164,351 

6.6 

1960  ... 

129,399 

35,761 

165,160 

6.7 

1961  .  .  . 

125,900 

39,939 

165,839 

6.7 

1962  .  .  . 

121,934 

44,405 

166,339 

6.7 

1963  

117,636 

49,080 

166,716 

6.7 

1964.  .. 

113,059 

53,901 

166,960 

6.7 

1965  

108,249 

58,815 

167,064 

6.8 

1966.  . 

103,239 

63,843 

167,082 

6.8 

1967  .  .  . 

98.136 

68,964 

167,100 

6.8 

1968  .  .  . 

92,979 

74,137 

167,116 

6.8 

1969  .  .  . 

87,772 

79,332 

167,104 

6.8 

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100 


CHAPTER  VIII 


ACTUARY'S   CHAPTER 

The  yearly  costs  of  present  pension  systems,  as  given  in  Chapter 
VI,  were  computed  by  means  of  an  Active  Service  Table,  and  Salary 
and  Pension  Scales,  according  to  the  usual  methods.  For  a  descrip- 
tion of  the  methods  employed,  the  reader  is  referred  to  the  Report  of 
the  Illinois  Pension  Laws  Commission  of  1916.* 

The  cost  under  the  proposed  plan  was  computed,  in  the  cases  of 
the  firemen's  and  public  school  teachers'  funds,  by  use  of  the  same 
service  tables  and  salary  scales  as  were  used  in  determining  the  costs 
under  the  present  plans.  In  each  case,  the  actual  liability  as  of  Janu- 
ary 1,  1922  was  first  computed  and  then  by  means  of  the  tables  men- 
tioned, the  part  of  such  liability  that  might  be  expected  to  become  an 
actual  liability  after  resignations,  dismissals  and  deaths  were  accounted 
for,  was  determined. 

As  the  method  of  attack  on  such  a  problem  is  obvious,  no  good 
purpose  would  be  served  in  entering  into  detail  as  to  the  exact  manner 
in  which  this  part  of  the  work  was  performed. 

In  computing  the  cost  under  the  proposed  plan,  in  the  case  of  the 
policemen's  fund,  the  actuary  did  not  employ  the  methods  used  in  the 
other  cases  but  based  his  computations  on  the  cost  to  be  expected  under 
the  operation  of  this  fund,  on  a  sound  financial  basis. 

His  adoption  of  such  a  course  was  due  to  the  low  rates  of  service 
retirement  exhibited  by  the  statistics  of  this  fund,  and  the  certainty  in 
his  mind  that  such  low  rates  would  not  continue  if  the  fund  was  placed 
on  a  sound  financial  basis. 

If  he  is  in  error  in  assuming  that  these  low  rates  will  not  continue, 
the  only  effect  would  be  that  this  fund  would  be  placed  on  a  full  re- 
serve basis  a  few  years  earlier  than  it  otherwise  would  be,  while  if 
it  should  happen  that  the  low  rates  would  not  continue  and  his  calcula- 
tions were  based  on  the  supposition  that  they  would  continue,  an  in- 
justice might  result  to  this  group  of  employes. 

In  determining  the  cost  under  the  proposed  plan  in  the  case  of 
the  municipal  employes,  the  actuary  was  unable  to  construct  an  active 
service  table  because  this  group  is  not  now  in  any  pension  system.  In 
this  case,  he  took  the  only  course  possible  for  him  and  used  the  table 
he  had  himself  assisted  in  preparing  for  the  municipal  service  of  Chi- 
cago. He  believes  that  the  amounts  stated  will  be  entirely  sufficient 
to  finance  this  fund. 

In  the  preparation  of  this  Report  and  the  Bills  accompanying  it, 
the  greater  part  of  the  actual  details  of  the  work  naturally  fell  to  the 

•A  copy  may  be  obtained  by  addressing  D.  F.  Campbell.   78  W.  Monroe  St.  Chicago.  111. 

101 


ACTUARY'S    CHAPTER 

Actuary  and  the  Technical  Advisor  of  the  Commission.  But  although 
the  actual  working  out  of  the  details  fell,  for  the  most  part,  to  them, 
the  designing  of  the  plan  in  its  outlines  was  a  duty  imposed  on  the 
Commission,  and  each  member  of  it  responded  to  the  call  to  perform 
this  public  duty  with  a  faithfulness  of  purpose  and  conscientious  effort, 
worthy  of  the  cause.  During  the  period  when  the  plan  was  under  con- 
sideration, each  gave  of  his  time  unsparingly,  and  each  contributed  ma- 
terially to  the  work. 

Where  all  have  done  so  well,  it  may  be  perhaps  unjust  discrimina- 
tion to  particularize,  but  the  other  members  of  the  Commission,  and  the 
Commission's  Staff,  wish  the  public  to  know  that  Mr.  Manschot,  the 
Chairman  of  the  Commission,  devoted  his  entire  time  to  this  work  and 
brought  to  it  the  experience  of  a  long  life,  with  the  conscientious  eflfort 
.of  manhood,  and  the  enthusiasm  of  youth,  and  all  without  hope  of  re- 
ward other  than  the  satisfaction  that  would  be  his  if  the  work  were  well 
done. 

HIS  HONOR,  the  Mayor,  THE  HONORABLE,  the  Common 
Council,  and  all  in  position  of  authority  have  aided  the  Commission 
in  its  work  in  every  way  possible. 

The  Commission  was  extremely  fortunate  in  the  choice  of  its 
Executive  Secretary.  Mr.  Herwig  joined  the  staff  about  March  1, 
without  extensive  knowledge  of  pensions.  Since  then,  he  has  become 
a  real  expert  on  the  subject.  He  gathered,  under  direction  of  the 
Actuary,  the  data  used  in  preparing  this  Report.  He  devised  and  wrote 
Chapter  V,  the  chapter  dealing  with  the  History  of  Pensions,  and 
among  the  many  articles  dealing  with  this  subject,  this  is  quite  the  best. 
He  had  in  charge  the  publicity  end  of  the  work,  and  the  gratifying 
situation  existing  where  the  great  body  of  employes  understand  the 
proposed  plan  and  approve  of  it,  is  due  in  great  part  to  Mr.  Herwig's 
efforts  in  explaining  the  plan  to  them. 

The  City  Attorney  assigned  to  the  Commission  as  Legal  Advisor, 
Mr.  W.  J.  Mattison,  whose  knowledge  of  the  law  with  his  willingness 
to  help  have  been  invaluable. 

The  thanks  of  this  Commission  are  due  and  are  hereby  tendered 
to  the  Milwaukee  Public  Library  and  to  the  Municipal  Reference 
Library  and  more  particularly  to  Mr.  Ovid  B.  Blix  and  Miss  C.  H. 
McGovern  of  the  Municipal  Reference  Library. 

A  deterrent  influence  to  sound  pension  legislation  in  this  country 
has  been  the  hostile  attitude  toward  such  Jegislation  on  the  part  of  the 
employes  concerned. 

That  this  Commission  will  have  no  unpleasant  recollection  of 
hostility  on  the  part  of  the  employes  is  due  in  great. measure  to  its  own 

102 


ACTUARY'S    CHAPTER 

wisdom  and  in  great  measure  to  fhe  good,  sound,  common  sense  dis- 
played by  the  employes  of  the  city. 

One  of  the  first  acts  of  the  Commission  was  to  classify  the  em- 
ployes into  groups,  corresponding  to  the  groups  that  they  had  in  mind 
would  comprise  the  several  groups  in  the  proposed  system.  It  then 
asked  each  group  to  elect  an  Advisory  Council  of  some  50  to  80  em- 
ployes, depending  on  the  size  of  the  group. 

Each  Advisory  Council  was  asked  in  turn  to  elecjt  a  Consulting 
Committee  who  would  be  the  body  to  bring  before  the  Commission, 
after  approval  by  the  Advisory  Council,  any  recommendations  which 
the  employes  might  see  fit  to  make. 

A  duty  imposed  on  each  Advisory  Council  and  Consulting  Commit- 
tee was  to  explain  the  provisions  of  the  proposed  plan  to  their  fellow- 
employes. 

All  Advisory  Councils,  without  exception,  performed  this  duty 
well,  as  did  also  all  Consulting  Committees  with  one  exception. 

In  one  single  instance,  the  employes  of  the  group  concerned  were 
placed  in  an  unfortunate  position  in  that  two  members  of  their  Con- 
sulting Committee,  one  of  them  the  chairman,  adopted,  from  the  out- 
set, an  attitude  toward  the  work  of  the  Commission  which  could  be  in- 
terpreted only  as  one  of  hostility.  As  a  result  this  group  did  not  ex- 
perience the  full  benefit  of  the  campaign  of  education  and  friendly  co- 
operation with  the  Commission  which  was  expected  when  this  Commit- 
tee was  authorized.  The  Commission,  however,  through  its  Executive 
Secretary  and  Actuary  did  everything  in  its  power  to  see  that  the  em- 
ployes of  this  group  were  made  acquainted  with  the  provisions  of  the 
proposed  plan. 

If  the  proposed  plan  is  adopted,  the  city  of  Milwaukee  will  be  the 
first  city  in  this  or  any  other  country  to  adopt  a  uniform  and  equitable 
pension  system  for  all  its  employes,  with  adequate  'provisions  for 
financing  it,  instead  of  the  makeshifts  now  too  often  in  effect. 

The  Actuary  and  the  Technical  Advisor  hope  that  this  honor  will 
come  to  your  city,  and  if  it  does,  their  principal  reward  will  lie  in  their 
consciousness  that  in  doing  their  part,  they  haye  done  it,  each  to  the 
best  of  his  ability. 


103 


